§ Order for Second Reading read.
§ 11.7 a.m.
§ Mr. Bryan Davies (Enfield, North)
I beg to move, That the Bill be now read a Second time.
The Bill intends to control certain activities of estate agents. Although I recognise that this measure is an important one and one which requires and merits the closest scrutiny of the House, I hope that the degree of consultation in which I have been engaged and the nature of these measures will perhaps return us to more normal Friday practice than has been the case in the past fortnight, when our attendance has been higher but our degree of division has been sharper.
The Bill proposes to regulate activities in an area where the consumer merits the greatest degree of protection. After all, the purchase or sale of a home is one of the most important transactions in which most of us engage. It is one in which people seek to make substantial plans for the future and in which they have a tremendous emotional commitment, and it is one in which often we demonstrate the least degree of expertise simply because very few of us, as ordinary consumers, are practised in the buying and selling of houses. It is not an activity in which most of us engage every day.
It must be recognised that the vast majority of the general public enter into the buying and selling of houses very infrequently and on the basis of very limited knowledge of the subject. Therefore, it seems all the more necessary to introduce procedures to protect the consumer when he is making significant and important choices and decisions on matters in which his expertise may be excessively limited.
The importance of the role of estate agents has increased in the last two or three decades. The welcome growth of owner-occupation has inevitably placed a much greater emphasis upon their activities. Against the long-run development of the sale and purchase of houses must be set short-run developments which make this measure appropriate at this time. It 886 is distinctly possible that over the next year or 18 months there will be a great increase in the housing market. There are many indications to that effect, and I hope that through our debate today, and perhaps subsequently in Committee, and through the Bill becoming law we can help to guarantee that this increased activity will take place within a framework of adequate consumer protection.
Attempts to bring some regulation into the purchase and sale of houses has exercised Parliament over the last 80 years. Hon. Members may have received a comment from one national association to the effect that we could almost be celebrating the eightieth birthday of parliamentary attempts to regulate the business of estate agents. It cannot be suggested, therefore, that we are involved in a novel exercise. Substantial consideration has been given to the problems before. There have been 11 attempts through Private Members' Bills to legislate on the subject. Those attempts have been wrecked by the approach. It has sought to embody registration which was dependent upon a system of licensing. Those Bills sought a system of licensing and a licensing body which could guarantee that those who practised estate agency met certain minimum standards. There has been an obvious difficulty, however, of defining the necessary qualifications and credentials to engage in this aspect of the sale and purchase of houses. A further problem has been to decide who is qualified to judge the fitness of such people.
The great difficulty has always been to set up some national body of control and a licensing procedure which would command support from all estate agents. Reservations have been expressed that such an exercise is exceedingly bureaucratic and is overlarded with control. I believe that in the Bill we have met some of the objections of the past. I hope I have produced a measure which will give the consumer adequate protection.
The basis of my Bill is to minimise the degree of central bureaucratic control. The problem in estate agency revolves around not the general practice of the profession but a minority of rogues. Letters and representations received by hon. Members may well lead them to conclude that there is no such thing as a good estate agent, just as other 887 letters would lead one to conclude that there is no such thing as a good Member of Parliament. If an estate agent is efficient people question the basis upon which he is charging his fee, since his service is clearly easy to accomplish. If he takes a long time in providing a service he is clearly guilty of incompetence. That is the unfortunate view that the general public has of estate agents. As a Member of Parliament I can sympathise with many estate agents, because Members of Parliament, too, suffer from unjust criticism.
The practice of buying and selling houses, involving as it does big decisions and substantial amounts of money, leaves the door open to exploitation by the less reputable elements in our society, and we must control these people. I am therefore proposing in my Bill to protect the public from fraudulent, criminally violent and dishonest agents. I have sought to provide protection from abuse and malpractice, and general minimum standards, which I hope over a period will certainly be raised. These standards cannot easily be defined in terms of competence or academic or professional qualifications. What is clearly necessary is the provision of good standards of probity and honesty. Those are the targets that I hope we can hit with this Bill.
The reputable estate agent has nothing to fear from the Bill. The many agents who belong to the reputable bodies adopt voluntarily many of the standards in the Bill. A good 25 per cent. of practising estate agents do not join any of the reputable associations, and there is public concern and there is evidence to demonstrate, that the unscrupulous agents who are not members of these associations succeed in perpetrating unfortunate acts against the public. Money has in the past been prised from members of the public and has then been defaulted upon. Occasionally there is a failure to indemnify clients for moneys that have been lost.
Members of the public have been concerned that estate agents have failed to declare an interest, when acting on behalf of the seller, in the purchase of the property. Clearly, that has affected the bargain which has been struck. It is important to guarantee also that estate 888 agents do not infringe the law on sex or race relations discrimination.
It is because of this concern by the public and by reputable estate agents that their general activities should receive a degree of public approval that I believe that the time is ripe for a Bill to regulate and to control. Only last year the hon. Member for Rochdale (Mr. Smith) brought to light one abuse by estate agents. The hon. Member is a sponsor of the Bill and I hope that even in his absence he is demonstrating considerable support for it. Last year he sought to demonstrate the unfortunate circumstances in which clients could incur expenses and ordinary members of the public could be charged for services rendered by an estate agent who did not succeed in selling the house. That seems to me to indicate how weak is the position of the public in terms of its protection against this kind of activity. Certainly the measures which I propose will meet that point.
I propose to identify certain of the main features of the chief clauses of the Bill. I hope that hon. Members will forgive me if I do not go into that degree of detail which might inhibit them from making their own contributions subsequently to the debate. I am sure that the debate will be helpful in determining the priorities which we should follow, and perhaps also indicate areas which we may be able subsequently in Committee to resolve and refine.
Clauses 1 and 2 define and limit the estate agency activity to be controlled. In essence, the activity I am seeking to regulate is the bringing together in the course of business of buyer and seller of residential property with the object of effecting a transfer of interest. I believe that this simplifies my Bill without any loss of effective regulation. It is not possible just to propose the control of estate agents. The range of their activities varies enormously from firm to firm, and there can be no satisfactory or easy and comprehensive definition of an estate agent. I have concentrated on residential property, defined in Clause 2, because it is in this area, in my view, that the public most needs protection.
I have not proposed to extend the control to builders, as I have been urged in some quarters to do, or to building companies selling houses direct to the public, because over 95 per cent. of new 889 houses are covered by the National House Building Council's indemnity scheme. I understand that the Department of Prices and Consumer Protection is involved at the moment in discussions with the NHBC with a view to strengthening that scheme further.
In Scotland, much estate agency work is carried out by solicitors, and although I hope that in due course we shall guarantee that adequate protection is provided for Scottish people, as for the people in the rest of the United Kingdom, I propose to exempt solicitors from the scope of the Bill on the ground that throughout the United Kingdom solicitors are already subject to strict rules of entry and conduct and can be disbarred for unprofessional practice.
With the similar aim of avoiding unnecessary duplication of control, I also propose to exempt credit and insurance brokerage, as these are subject to other detailed controls in the Consumer Credit Act 1974 and the Insurance Brokers (Registration) Act 1977.
The core and heart of the Bill lie in Clauses 3 to 7. I propose within these clauses to give the Director General of Fair Trading the power—subject, of course, to processes of appeal—to prohibit by order any person from engaging in estate agency work, in whole or in part, if the Director General considers him unfit to do so on quite specific grounds. These include, in Clause 3, convictions for crimes of violence or fraud, contraventions of the Consumer Credit Act 1974, racial and sex discrimination, and engaging in practices which may be declared by the Secretary of State by order subsequently to be undesirable.
These are powerful controls and powerful sanctions, and it will not be from the number of times that they are implemented that their benefits will flow. It will be, in my view, from conditioning the general framework within which estate agents work. I believe that these controls and sanctions will be a powerful deterrent from which the public and estate agents themselves will benefit. But it is true that a powerful sanction of this kind, in the hands of an official, needs careful checks and balances if the liberties of the subject are to be properly safeguarded.
890 My approach has been to enable the Director General to exercise effective control by giving him adequate flexibility to form a rounded judgment of the fitness of an estate agent to practise, but at the same time I want to leave a practising estate agent in absolutely no doubt about which of his actions may cause the Director General of Fair Trading to move against him.
It is of the greatest importance that people engaged in estate agency work, and in the buying and selling of residential property, should know exactly that which will occasion the interest of the Director General of Fair Trading in a critical capacity. I have tried to achieve both these objects by specifying clearly in Clause 3 the events which will trigger a full investigation by the Director General which could lead to an order prohibiting an agent from practising.
As all the events which might trigger an investigation are clearly specified, every estate agent has forewarning of any actions of his which could threaten his livelihood. The events include contravention of provisions of the Act or regulations made under it, and the Director General has full power to obtain information to enable him to decide whether there has been a contravention. Therefore, I believe that the Director General is in a position to form a rounded judgment of an agent's fitness in any circumstances.
My proposals provide, of course, for an estate agent to be able adequately to defend himself against the decisions of the Director General, and to make representations to the Director General before the Director General reaches any decision. In addition, I have sought to make adequate provisions for appeal, in the first instance to the Secretary of State, and then to the High Court on a point of law from any decision by the Secretary of State.
In all these ways, I believe that my proposals draw the necessary balance between justice and effective administrative control. In these clauses I have tried to limit unnecessary duplication. Clearly it is right that the powers of the Director General of Fair Trading under my Bill should not duplicate those in the existing law on sexual and race discrimination. I admit this point by proposing that the Director General may use his powers in 891 this respect only after a person has been found by the appropriate sex or race discrimination authority to have discriminated.
Clauses 8 to 10 enable the Director General to call for information to assist him in discharging his functions under the Act. They contain the usual restrictions on disclosure of information to third parties and provide for the usual powers of entry and inspection which are given to recognised officers enforcing legislation.
Clauses 11 to 16 contain my proposals for protecting clients' money in the hands of estate agents. These clauses require estate agents to pay clients' money into a separate client account, and they empower the Secretary of State to make regulations about the keeping of clients' accounts. They also provide that estate agents must not accept clients' money unless they are covered, by insurance or other arrangements, against failure to account for money. These proposals amount to a statutory requirement for all agents to adopt the best practices of existing agents—practices which, of course, are encouraged and have been developed by the major associations of estate agents. Failure to carry out these proposals may incur the penalty of a fine, and a conviction can trigger action by the Director General under Clause 3 for investigation in the round of the estate agent's activities.
In my view, these clauses will provide valuable protection for the general public in an area in which there have been a number of abuses and malpractices in recent years.
Clauses 17 to 21 contain my proposals for regulating other aspects of estate agency work. Clause 17 requires an estate agent to give his client full particulars about his liability to pay the agent's remuneration before any agency agreement is entered into; in other words, that members of the public should know quite clearly any charges which they are likely to incur on engaging an agent. Failure to comply with this obligation will render the agency contract unenforceable.
Of course, the thrust behind this clause is to deal with those abuses which have come to light and those to which I made particular reference when I mentioned the 892 contribution to our debates of the hon. Member for Rochdale on 8th March 1977, when he sought to protect vendors from agents who advertise on a no sale, no fee basis and in which circumstances one of his constituents incurred charges from an agent who had not sold the property.
Clause 18 empowers the Secretary of State to prescribe by regulation a limit on any pre-contract deposit sought by an estate agent. It has been suggested that pre-contract deposits ought to be debarred by legislation. I have not taken that view. It is certainly the case that not merely estate agents themselves but the general public recognises that if a commitment to purchase expressed in monetary terms were disallowed by legislation it would still be likely to go on in rather unfortunate circumstances. The tendency would clearly be for people to buttress their determination to purchase a property by some evidence based upon a monetary stake. Therefore, I do not think that it fits the needs of the general public to talk in terms of preventing pre-contract deposits.
What is important is to control such deposits when they are in the hands of estate agents, and perhaps for the Secretary of State to think from time to time in terms of indicating what the upper limit of such deposits might be.
Because of differences in law and in practice, this provision and those relating to clients' money in Clauses 11 to 16 do not apply where the property concerned is in Scotland. But the way is open to apply these provisions to Scotland in a specific Scottish form at a later date. I hope that the necessary amendments will be tabled in Committee.
Clause 19 provides for the disclosure by an estate agent of any personal interest he may have or hope to have in the property which is the subject of a transaction in which he is acting as the selling agent. It is an attempt to outlaw an unfair practice about which there have been complaints by both the public and the association representing estate agents.
Clause 20 will enable the Secretary of State to make provision by regulation for ensuring that estate agents satisfy minimum standards of competence. I think that it is right to treat this important subject in this way rather than trying to 893 devise and impose in legislation comprehensive codes of conduct on all estate agents at this stage.
I am by no means convinced that at present we are clear as to what the necessary requirement are in terms of competence, and I am not seeking unnecessarily to restrict entry into estate agency, nor, indeed, to force those who wish to remain outside into the arms of an existing professional association. On the other hand, it is clear that we may be able in due course to develop basic minimum standards of competence which would be recognised by the public, I think, as an increasing guarantee of the effectiveness of the service that will be offered. But the consumer will not benefit from any of my proposal unless estate agency is enable to remain competitive.
It seems right that the minimum standards under which estate agents operate should, in the last resort, be a matter for Government concern on behalf of the public. My proposals require the Secretary of State to take as much account of practical experience as of professional or academic qualifications in setting minimum standards.
I hope that those hon. Members who feel that on occasions perhaps I have been over-zealous in advocating the claims of the education service in our society will recognise that on this occasion I am not seeking to put forward the proposition that educational qualifications as such are the basis for an adequate service to the public in this area. My proposals require the Secretary of State to take account of practical experience, too. I do not believe that a high level of academic achievement is a necessary precondition for competence in arranging the sale or purchase of houses. Nor do I want my proposals to be the vehicle for promoting any particular sectional interest.
I also think it right to propose that the Secretary of State should be enabled to make any regulations under this clause at a time of his own choosing, to give him the opportunity of assessing the need for them in the light of the experience of the working of this measure should it become an Act. It is also right that he should consult representative interests before making any regulations about standards of competence, and the clause pro- 894 vides for that. This should ensure that the standards imposed are practicable and acceptable to all the interests affected by them.
Those represent my chief proposals.
§ Mr. Roger Moate (Faversham)
Before the lion. Gentleman leaves that set of clauses, perhaps he will assist me. Am I right in assuming that under Clause 20, which lays down standards of competence, it would not be necessary for a person practising or intending to practise estate agency to secure any authority to do so from any central body, having satisfied it that he meets certain standards? Am I right in assuming that it would simply be necessary for him, when practising, merely to produce evidence of competence when challenged? I am concerned about the bureaucratic question and the whole question of licensing.
§ Mr. Davies
I think that I can reassure the hon. Gentleman on exactly those terms. The whole philosophy of the measure in those terms, as he will recognise, is that it is not a licensing measure but a control measure as and when default occurs. Within that framework, therefore, I am seeking to ensure that entry to the profession should be on the basis overall of free entry, while in due course we shall gradually see proposals from the Secretary of State on minimum standards of competence. That is not laid down within the framework of the measure at present—except the provision that consultations should take place, and the opportunity for evolving standards gradually.
Clause 21 provides that bankrupts are not to engage in estate agency work. It is an obvious protection for the general public who entrust money to estate agents.
Those are the chief proposals in the Bill. They enjoy support from all quarters of the House, as is indicated by the number of hon. Members on both sides of the House who have sponsored the Bill. I wish especially to pay tribute to the past work of my hon. Friend the Member for Ipswich (Mr. Weetch), who clearly defined what he considered to be necessary legislation in his Ten-Minute Bill speech on 7th July 1976. I have no doubt that he envies me the opportunity to incorporate many of those ideas in a 895 speech in a rather more substantial debate. I hope that he will be blessed with the good fortune to translate a good deal of his interest and wisdom into a Bill in due course.
In his speech in July 1976 my hon. Friend mentioned the need for the production of a controlling measure which would eliminate the minority of rogues. He said that we should encourage the reputable majority in their existing associations and should not seek legislation that would restrict entry.
§ Mr. Arthur Jones (Daventry)
May I ask the hon. Gentleman a question on the licensing point? As I understand it, people must be registered. because Clause 15 requires estate agents to display on their premises a certificate that a policy of insurance is or that authorised arrangements are in force to comply with the regulations. How different is that from the licensing of estate agents? Before an estate agent can practise he needs to display that certificate, and the display of the certificate will need to be monitored by the Director General of Fair Trading or the local authority's weights and measures department.
§ Mr. Davies
I appreciate the hon. Gentleman's point, but Clause 15 relates to a very narrow area of the estate agency role. It relates to an estate agent's taking clients' money. Those estate agents who voluntarily decide that they will not take clients' money—some have indicated that they never have and have no intention of doing so—will not need to display the certificate. Therefore, they are not part of a licensing procedure. That shows how narrowly the licensing concept operates within the Bill.
In addition to the support that the Bill enjoys throughout the House it has the support of the major associations. I know that they have circulated hon. Members commending the Bill and seeking their support. The associations have a great interest in advancing the good name of their members. Although there may be points of detail to which they wish to address their minds in due course, and although we are not totally united on every aspect of detail, I know that the major associations give their warm support to the Bill in broad principle.
896 The Consumers Association also very much welcomes the Bill for the protection it offers the consumer. Should the Bill make progress, it will also benefit from the support and commitment of the appropriate Government Department, for the Government have also indicated that they support the proposals I have outlined.
Therefore, I commend the Bill to the House as a measure enjoying widespread support in principle. I hope that I have given evidence of the widespread consultations that underpin it. There are points of detail to be discussed, but I hope that hon. Members will agree that they are more appropriate for the Committee stage.
I hope that I have done enough to demonstrate that the Bill is necessary and worthy of being considered seriously as a measure to be placed upon the statute book this year. I hope to gain the support of all hon. Members for its Second Reading.
§ 11.45 a.m.
§ Mr. Andrew MacKay (Birmingham, Stechford)
I must declare an interest first, as a partner in an estate agency practice of Jones, MacKay and Croxford in Birmingham and, secondly, as consultant to a firm of house builders in the Midlands, Birmingham Housing Industries Ltd.
A survey was recently conducted among sixth-formers at a wide range of schools. They were asked whom they liked least and distrusted most in society, and two people came out on top—first, the estate agent and, secondly, the politician. As I am both, I do not want to ask the House where that puts me.
Be that as it may, it is because of enlightened self-interest as much as anything else that I am here today to support the hon. Member for Enfield, North (Mr. Davies) on the Second Reading of his Bill. In the estate agency business we have suffered from a certain number of what the hon. Gentleman described as rogue agents. They are the people who gain all the publicity and the people about whom we receive letters from constituents who have been abused and fiddled. That sort of thing unfortunately results in distrust of all estate agents. If the Bill is to do anything useful, the most important thing it will do is clear the air 897 and make an honourable and important profession a little more presentable in the eyes of the public.
I support the principle of the Bill and therefore will support the Second Reading, but I have reservations about certain clauses. It would be wrong of me to go into too many details at this stage—I hope that we can take the matter a little further in Committee—but I should like to refer to a few points now.
First, the Director General of Fair Trading is involved. I have nothing personal against him, but I wonder whether a bureaucrat or civil servant is the right person to administer the registration that the hon. Gentleman requires. It would be better to have regional boards or committees made up principally of estate agents who were members of the various institutions in estate agency.
There are two reasons for that. First, there is the precedent of the legal profession. Its system works very well, with the Law Society at regional level administering it. Secondly, I am very mindful that the Bill could catch the wrong sort of person, the innocent, small estate agent who occasionally makes a mistake, while the real rogue agent whom the hon. Gentleman and I want to nail by the Bill would get away with it. He will be able to pull the wool over the eyes of the Director General of Fair Trading. It would be better if estate agents were judged by their peers, who would be able to see the problems much better. I believe that we should then have a more effective Bill.
§ Mr. Ken Weetch (Ipswich)
The hon. Gentleman has brought me to my feet with a horrified start. Is he suggesting that the machinery to be set up should be anything like that of the Law Society?
§ Mr. MacKay
I appreciate the hon. Member's interest in the Law Society and related subjects. I am suggesting that it should be similar. It is not right to go into details now. I hope that in Committee we shall discuss this matter at greater length. It is wrong to have a civil servant administering this scheme. It would be in the interests of the Bill to look at this provision in greater depth.
The second area which worries me a little and which perhaps concerns my hon. Friends even more is the reference to the 898 Equal Opportunities Commission and the Commission for Racial Equality. I wonder whether these are relevant to the purposes of the Bill. If they are relevant, as the hon. Member for Enfield, North believes, where do we draw the line? What about someone who is convicted of indecent exposure, of various sexual assaults, or of drunken driving? When we do we say morally that a person should not be practising as an estate agent? I believe that the references to the Commission for Racial Equality and Equal Opportunities Commission should be deleted. It would be possible to deal with cases which came before the courts and which were of an extreme nature by virtue of another clause in the Bill relating to whether a person was fit to be an estate agent.
I come now to the insurance indemnity which the Bill requires estate agents to have. The principle is sound, and I do not imagine that many people will object to it. Has the hon. Member consulted the insurance companies? I have a feeling that it will not be easy to arrange this insurance. Even if it is possible to arrange it, I am worried about the cost of the premium. In my practice we would have no objection to such a provision. We would be absolutely delighted to carry out that which is required by the clause. However, we would object to paying a premium of several hundred pounds. I know of small practices which would find this financially unacceptable. It would undoubtedly seriously affect the running of some practices.
There are certain exemptions to this provision regarding insurance whereby some firms might be allowed not to have a certificate. I do not like the suggestion that the big chartered surveyors, who are supposed to be very respectable and marvellous, are above suspicion and therefore do not need a certificate but the smaller firms must have one. If we are to operate this provision it ought to apply to everyone. We do not want first and second-class citizens.
I mean no disrespect to the Royal Institution of Chartered Surveyors and all of those who are qualified but I thought the hon. Member for Enfield, North made a valid point when he said that there were many unqualified estate agents who do as good a job as qualified 899 agents and who, in certain respects concerning personal services and competitive pricing, do a much better job. I should not like there to be any discrimination between such people as a result of this clause.
§ Mr. Bryan Davies
Perhaps even at this stage I can reassure the hon. Member fully on one point and partially on the other. The distinction between those who require the indemnity insurance and those who do not is not between the big firm and the small firm but between those who take clients' money and those who say that they have no intention of doing so. Investigations are being made into whether it is possible for the small firms to obtain adequate insurance cover. A leading firm of brokers has said that it feels that this ought to be possible. I do not have any response to the point the hon. Member has made on the size of the insurance premium.
§ Mr. MacKay
I am grateful to the hon. Gentleman. I cannot understand what estate agents are doing in business at all if they are not taking deposits. The hon. Member made an eloquent point dealing with why deposits should be retained, and we would all agree with him. It surprises me to hear that there are agents who are not taking deposits. I would question their competence.
I come now to the subject of bankrupts. I hold no brief for bankrupts, but I wonder whether it might be possible for undischarged bankrupts to be allowed to become partners in a firm where they are not sole practitioners and when the cause of their bankruptcy relates to a quite different line of country. I do not feel strongly about this, but I would like the hon. Member to consider the point.
I support the hon. Member for Enfield, North in his claim that we must not discourage new people from entering the profession and setting up new practices. If the profession is to flourish and the consumer to have a fair deal there has to be a wide variety of choice. That is the best way of keeping fees down and making agents competitive. At the same time we must have reasonable powers to stop the rogues continuing in practice. I am delighted to hear that the hon. Member will be taking this point seriously in Committee.
900 Since I have been highly critical of certain clauses in the Bill—some hon. Members may think that I have been trying to de-gut the Bill—let me now take the opposite point of view and say that I believe that in one area the Bill does not go far enough. We all know that there are many "spiv" agents who door-knock. Many hon. Members will have received complaints from their constituents about such people. They are very persuasive. Someone may approach my firm. We value their property at £12,000 and say that we shall put it on the market at that price. The "spiv" agent will knock on the door of this person and tell him that his firm can get £17,000 for the house. We are all avaricious. It is part of human nature. The more gullible will think that an extra £5,000 would be marvellous—it would pay for next year's holiday, for fitted carpets and all the other things required in the next house.
The gullible vendor will be encouraged by the "spiv" agent to sign a legally binding document giving the "spiv" agent the sole selling rights over the property for a period of, say, six months. If, at the end of that period, the property has not been sold a fee or commission can still be claimed. Any reputable firm charges commission only on the sale. The only expenses incurred when a sale does not take place will be on advertising and general disbursements which will be agreed beforehand and which are covered in another good clause in this Bill.
It is not easy to legislate to stop the practice I have described. I suggest that there should be a cooling-off period so that the gullible vendor would have, say, a fortnight after signing the agreement when his relatives, another estate agent or his solicitor, might have the opportunity to point out the disadvantages of the agreement. The most serious aspect of the activities of these rogue agents is that they gain fees and commission without trying to sell the property. The gullible vendor has been fooled into thinking that a fantastic price can be obtained for the property and has, therefore, signed the unfair agreement.
I do not wish to name the firms, but there are seven in Birmingham which caused a great deal of concern to members of my profession, to Members of 901 Parliament representing Birmingham constituencies and to the public at large.
There is a feeling on this side of the House against registration full stop. Also, there is a general feeling in the House that we have been over-legislating recently, and possibly entering fields that we know very little about. In doing so we can do a great deal of damage and bring the House and politics generally into disrepute. I agree with that feeling all the way. Had I been in the House for the Second Reading of the Hairdressers' (Registration) (Amendment) Bill, I would have voted against it.
Having said that normally registration is not a good thing, I must make it clear that I feel that this Bill is a very different case. Estate agents have a great responsibility because of the financial aspects of the money they hold for their clients. Secondly, for the overwhelming majority of people the most expensive thing they will ever buy and the most important investment they will make in their lives is their home. We must not take that lightly. Therefore, registration is right in this case, and it will act in the interests of the consumer, the public and the estate agents.
§ Mr. MacKay
I think that my hon. Friend has touched upon a technical nicety. There is no licensing in the Bill, but, in effect, we are talking about registration. At least, that is how I see it. Perhaps the sponsors will disagree. In certain quarters of the House I have heard of opposition to the Bill because of the similarity of its provision to registration, so I think that I am making a valid point. This Bill cannot be compared with more frivolous legislation that is passing through the House.
I support with pleasure the hon. Member for Enfield, North, on behalf of estate agents and consumers, and I am sure that the Bill will be favourably received outside the House.
§ 12.4 p.m.
§ Mr. Ken Weetch (Ipswich)
An estate agents' Act which seeks to regulate certain aspects of the profession is long overdue. The first attempt to put through a measure of regulation occurred some 90 years ago in 1888 with Mr. Duncan's Bill 902 for the registration of architects, engineers and surveyors, which would have covered estate agents. Therefore, these attempts at registration have quite a long history. In recent years such attempts relating to estate agents have accelerated sharply.
I congratulate my hon. Friend the Member for Enfield, North (Mr. Davies) on being the moving spirit behind the Bill. I have a special interest in the Bill and I shall speak strongly in its favour. I am encouraged by seeing that the Bill has attracted support from so many areas of the political spectrum. Last Session I promoted a Private Member's Bill on estate agency. What I hoped to do, and to some extent succeeded in doing, was to focus debate on the main issues involved. I only wish that I had done half as well as my hon. Friend the Member for Enfield, North.
The present situation is totally unsatisfactory. Anyone can set up in estate agency in Britain without any tests of competence. Anyone can set up without any obligation whatsoever to establish the fact that he is a fit and proper person to conduct a business, and without any framework of security, financial or otherwise, to offer to his clients and potential clients. Plainly, that is not good enough. The time has come for the Government to regulate the position.
I have never supported regulation for its own sake; that would be wrong. However, one should support regulation where it is needed. Looking at the arguments put forward over many years, I feel that in this case a minimum framework of control is necessary, and such control could be both constructive and beneficial.
What are the problems in the work of estate agents and the business generally? There are a good many abuses. Often, quite unscrupulous persons appear on the scene in twilight urban areas of the major conurbations and swindle inarticulate people who most need our help. We must try to protect these people who are least able to protect themselves. This sort of situation opens the way for the most flagrant abuses, most of which are very well known to hon. Members.
First of all, there is the bogus estate agent who decamps with the deposit. The money is often used for irregular purposes, and at present there is nothing to, 903 stop these bogus estate agents taking numerous deposits and misapplying them for their own purposes. An agent's duty is to represent the vendor in the sale, but there have been many occasions on legal record where an estate agent has a pecuniary interest in the deal himself. As the transaction goes along, his own interest is substituted for that of his client.
There have been a good many examples of estate agents who try to arrange a sale below the market price to an associate so that when the property is resold a substantial profit is made. I have seen some instances of estate agents taking three commissions on such deals. The first comes from the client to whom the agent gave the bad advice, the second comes from the associate who obtained the property at less than market price, and the third comes from the final sale when the property is eventually sold at the proper market price. There are other abuses, such as the deliberate misdescription of property. There is also the abuse of actively soliciting custom from bereaved relatives—a practice that is known in the trade as "coffin-chasing". Estate agents also persuade clients to use their services on terms that are loaded.
All those are definite abuses, but, as my hon. Friend for Enfield, North said, it would be unfair to say that malpractice abounds and that the estate agency service is a hotbed of unprincipled deceivers. That is not so. We are talking about a disreputable fringe element. It should be firmly placed on record that the main national organisations, the Royal Institution of Chartered Surveyors, the Incorporated Society of Valuers and Auctioneers and the National Association of Estate Agents, set standards and have codes of practice. They have disciplinary procedures and investigate complaints from the public and will indemnify clients against loss. They take scrupulous care of deposit money.
I also wish to put on record the fact that the majority of the estate agents who are not members of established associations deal very honestly and scrupulously with the public, too. They have scrupulous standards indeed. It is not a necessary mark of honesty and scrupulousness to belong to one of the professional organisations.
904 Although fraudulent and nasty practices are perpetrated by a minority, there is a need for a measure of comprehensive regulation. First, it will deal with the fringe elements I have described and will go a long way towards eradicating malpractice. Secondly, it will reinforce and give statutory backing to the voluntary codes of practice I have already described, and I think that is important. Thirdly, it will set comprehensive standards and codes of conduct for the profession.
Having said all that, I believe that there are a number of other comments that must be made. Regulation will not prevent all malpractice—we must realise that straight away—neither will the demanding of professional qualifications eliminate malpractice. A person can have all the professional qualifications in the world and he can be as bent as a hairpin. The fact that a man has professional qualifications means a great deal, but as for honesty and scrupulousness people with high levels of professional qualifications have no monpoly of honesty. What one can do is to safeguard the public against the worst abuses. One can see to it that the client does not lose his money, because that money is often part of a person's life's earnings. It is important that we should attempt to take that step. The legislation does not relieve the client of taking reasonable precautions and acting as prudently as he can. It provides only a longstop.
I believe that the main principles of the Bill are reasonable and acceptable because, among other things, it protects clients' money, and that is what we must do. It contains powers to declare certain persons unfit to do estate agency work and to practise. In my view, that provision is of crucial importance. It covers the aspect of how clients' money is to be held and accounted for and it provides for proper financial cover for estate agents. Furthermore, it provides for a register of orders against agents that can be inspected at any time.
The hon. Member for Faversham (Mr. Moate) intervened to ask whether this was a full system of registration with bureaucratic top-heaviness. The answer is that it is not. On the other hand, there are parts of this measure which have to be clarified in this respect, because this point should be made absolutely clear. There is room for argument in the Bill, 905 but the aims are unexceptionable. It is the principles of this matter that must be grasped. The remainder is administrative apparatus and financial detail. If we are to have argument—and I hope that we do—it will be about the regulations to be made and the nature of them. The principles we are discussing today are fairly clear-cut and acceptable. I hope that there will not be opposition to the principles of the Bill just because some people have doubts about what the regulations will contain. That is the wrong way to look at the matter.
The last comment I wish to make, which is important, is that, although I accept the Bill as a whole, I should like to make a few comments upon its provisions. Whatever the measure that emerges, it must operate with the minimum of bureaucratic machinery. That must be so. If we erect a massive edifice of bureaucratic machinery, we shall not get anywhere, because people will become disillusioned with the whole thing. We have already burned our fingers over the consumer legislation and the attempt to have a register in that area. That has given rise to enough problems. Therefore, what we should try to do is to act where the shoe pinches and not clutter up the measure with administrative ornaments.
This leads me to refer to the consultative document issued by the Department of Prices and Consumer Protection in November 1975. Paragraph 13 of that document reads:The Department considers that a regulation system seeking to regulate every aspect of qualification and conduct would not be justified…because it could tend to restrict entry into estate agency unnecessarily, contrary to the express recommendation of the Monopolies Commission".I think that is exactly right, and I support it 100 per cent., but although they are fine words, a crucial issue of principle is involved in that paragraph.
Let me seek to analyse that paragraph. It centres on the proposition relating to tests of competence for practising estate agents and is related particularly to Clause 20 of the Bill. I am choosing my words carefully because I take a particular view about professional qualifications and the operation of such qualifications in terms of the standard of work carried out. We must see to it that levels of professional qualification are not jacked up to a level 906 that amounts to a restrictive practice. Qualifications must be related to the broad character of the work done and should not go beyond it.
Let me give a parallel example on a matter that brought me to my feet on an intervention earlier in the debate. If we construct anything like the Law Society, I shall wish to God that we had never started. When one talks about restrictive practices, I believe that, compared with the legal profession, a plumber and his mate represent a high-water mark of free enterprise. If such a thing were to happen in respect of this measure, it would be a gloomy day indeed.
When property is conveyed in Britain—this is a direct and parallel example—part of the monopoly concerns solicitors and their qualifications. When one purchases property, one small part of the purchase, the transfer deed, is the monopoly of solicitors under Section 22 of the Solicitors Act 1974.
This has meant that the conveyancing of the broad mass of properties in Britain—which in the end, with the registration of property, is high-grade and administrative office clerical work—has become the province of expensive solicitors with high qualifications not commensurate with the work done.
I would like to see it firmly established in principle that we do not have a level of professional qualifications that restricts entry and competition and restricts the admission into this area of commerce and public life of people with new ideas who can offer us a constructive way forward in the problems we face.
§ Mr. David Weitzman (Hackney, North and Stoke Newington)
I wonder whether my hon. Friend knows the con-situation of the Bar Council or the Law Society. Is he suggesting that people ought to practise law who do not know law?
§ Mr. Weetch
I was talking about a particular problem, that of conveyancing. When my hon. and learned Friend asks me whether I know the constitution of the Law Society about conveyancing, my answer is that I know it very well. I have been up against solicitors and their representatives too many times in public, arguing about the onerous burden which comes on to people of modest means because of the solicitors' monopoly.
907 All I am saying is that I do not want anything like that in this Bill, and that if it happens it will be a sad day for those who want to use this service. I am talking about competition and new ideas and an open situation, which is what we want, coupled with protection of the public in the form of minimum regulation. I hope that the House will be seized of this idea, because in my view it strikes the right balance.
I welcome the Bill and give it my enthusiastic support, although, if I am concerned in the Committee stage, I shall watch certain clauses like a hawk. It deserves to reach the statute book. I think that it is a very good Bill indeed and that it indicates very strongly the way forward. Thirdly, the main occupation of the Standing Committee should be to ensure that everything we do is in the public interest and should not be specifically tailored to the needs of professional organisations, because the public interest and the interest of professional organisations are not synonymous.
§ 12.23 p.m.
§ Mr. Nicholas Scott (Chelsea)
As a sponsor of the Bill, I want to express my support for it and the hope that it will get its Second Reading today. It must be seen outside as a paradox that the largest single purchase that any of us make in life should have been so long in coming under any sort of consumer protection legislation. I hope that we are taking steps in that direction today.
Although we are, as the hon. Member for Ipswich (Mr. Weetch) says, seeking to deal with a fringe of rogue estate agents, as they have come to be called, the hardship they can cause to individuals is often immense and tragic. I am sure that we are right to be moving in in the direction of some form of regulation. I am also sure that the hon. Member for Enfield, North (Mr. Davies), whom I congratulate on his sense and judgment in bringing in the Bill, is right not to go in for any complicated and burdensome system of licensing.
The Bill is timely because, as those of us who take an interest in housing matters are aware, the market is changing. Prices are beginning to rise again. The word "gazumping" is beginning to come back into use. The housing market will be 908 active and lively for the next year or 18 months at least. We should consider whether it is possible to do anything about gazumping within the terms of the Bill. For example, it has been suggested to me that we should make it law that, once an offer by a prospective purchaser had been accepted, the vendor would be liable to pay fees to the estate agent on that purchase, so that there would be a disincentive to pursue another offer through another agent in the hope of getting a higher price. We might pursue that point in Committee and consider whether it would be possible to incorporate it within the terms of the Bill.
As the hon. Member for Enfield, North said, there has to be a balance between too much responsibility and too many controls and the protection of the public. He is right to restrict the Bill to residential property only, although we need to look at the problem of mixed property—for example, the small business with a residential element. I am sure, too, that the hon. Member is right to exclude solicitors because of the regulation that the profession already exercises.
We must be careful and take a very good look at the Bill in detail, because we are talking about penalties which are not fines but could deprive people ultimately of their livelihood if they offend against the Bill. It behoves us, therefore, to look at it very carefully indeed.
I am glad that we have the insurance provision. It is the closest we come to any kind of regulation. If a firm does not want to become involved in that part of the operation, it can cease taking clients' money. I have had a letter on this matter from a constituent practising as an estate agent who is clearly a member of a religious body which prohibits him from entering into any other association than the sect to which he belongs, and, therefore, any sort of entry into a scheme like this would be against his conscience. We must consider whether we can incorporate anything into the Bill to protect a gentleman like that or whether we shall have to say to him "We are sorry, but you have the option of simply not taking clients' money".
§ Mr. Scott
The gentleman says that entering into any sort of scheme such as is included in the provisions of the Bill would be against his conscience and the rules of his faith. I can only take his word.
The question of discrimination under equal opportunities and race relations legislation is difficult. However, I think it right that it should be in the Bill. It should be a substantial support for estate agents who behave responsibly. We know that there are vendors who will try to lay down particular conditions to an estate agent which would offend against the equal opportunities or race relations legislation. The fact that an estate agent will be able to say to such a vendor "I am sorry, but if I go along with your wishes I am putting my livelihood at stake" should be substantial and important support for those who practise sensibly and responsibly.
It has been said that the Bill has the support of the professional institutions. I have had a long and detailed letter from a body calling itself the Corporation of Estate Agents, which raises some fairly important points which I think can be dealt with in Committee. It is not a body of which I had heard until I received the letter, but in Committee we can see how far we can meet the points raised in the letter without undermining the basic principles of the Bill.
§ 12.30 p.m.
§ Mr. David Weitzman (Hackney, North and Stoke Newtington)
In my intervention during the speech of my hon. Friend the Member for Ipswich (Mr. Weetch), I was not for a moment suggesting that the control of estate agents should be anything like the control exercised by a body such as the Law Society. The work done by solicitors is very different from that done by estate agents. Certainly the control needed is not comparable with that exercised by the Law Society.
The Bill fulfils a long-standing need. Many efforts have been made in past years to place on the statute book very necessary legislation to deal with the practice of estate agents and the protection of the public. In my personal ex- 910 perience at the Bar, I have come across a considerable number of cases of defaulting estate agents and litigation with regard to their conduct. As, no doubt, is the experience of many other hon. Members, in my surgery there have been instances, particularly among coloured people, in which, because of a lack of understanding of the position, they are left very much at the mercy of estate agents. They sign forms the wording of which binds them in law to provisions that they do not comprehend. In some cases they lose their hard-earned savings as a result.
I recognise that of the many thousands of estate agents only a small minority offend, yet the public must and should be protected from that minority. My hon. Friend the Member for Enfield, North (Mr. Davies) is to be congratulated. He has obviously done considerable work and has engaged in detailed study in preparing a Bill which covers most of the problems. Other hon. Members have in past years sought to legislate on the subject. Bills were introduced in 1923, 1924 and 1928, and in 1934 a Select Committee recommended the keeping of a central register.
In my own days in the House I recall the efforts made in 1962, 1965 and 1966, and now the effort made by my hon. Friend the Member for Enfield, North. They all failed on a vote or because the Bills lapsed at the end of the Session. I hope that my hon. Friend's efforts will not suffer that fate.
It is interesting to note that in 1972 there was a motion before the House urging the Government—then the Conservatives—to bring forward legislation to license all estate agents, to appoint a registrar for the profession, to protect deposits of clients' money and to ensure a test of competency as part of their current proposals to protect the consumer. The then Minister—the hon. Member for Harrow, Central (Mr. Grant)—promised that the Government would consider carefully the possibility of legislation provided that they had clear evidence of the needs and interests of the consumer. Those needs and interests have been obvious for many years. Yet no Government since that date have done anything. It is left to my hon. Friend to use his luck in the Ballot to make good that deficiency.
911 My hon. Friend has opted, in my view quite properly, for neither the creation of a controlling statutory body, as in the case of insurance brokers, nor a system of licensing. He has been helped in so deciding by the fact that we now have a Director General of Fair Trading. My hon. Friend has rather ingeniously used the authority of the Director General and his services in the Bill. I would approve of that course rather than the suggestion made by the hon. Member for Birmingham, Stechford (Mr. MacKay) with regard to appointment by regional boards.
Fair dealing on the part of estate agents and the protection of the client are of paramount importance. They are the main objects of the Bill. They imply and necessitate competency and honesty on the part of the estate agent. As to competency, Clause 3 and Schedule 1 give the Director General of Fair Trading the power to prohibit persons from engaging in estate agency work if they are unfit on specific grounds. Clauses 8 and 10 enable the Director General to obtain the necessary information. Clause 7 directs him to keep a register of orders made by him.
Quite properly, there is a right of appeal to the Secretary of State by an aggrieved person under Clause 6. The promoter of the Bill, too, has protected a defendant in criminal proceedings under Clause 26 by enabling him to prove that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence. Competence, above all, is provided by the power given in Clause 20 to the Secretary of State to make regulations laying down minimum standards of such competence.
While I appreciate the criticisms that have been made of the proposal for regulations, I think that this is an important provision. As to honesty, there is an important provision in Clause 19 to the effect, according to the Explanatory and Financial Memorandumthat an estate agent…must disclose…any personal interest".That is a very important point.
As to the protection of the consumer, there are cases where defaulting estate agents have collected pre-control deposits and absconded or defrauded the client. The Bill, in my view, has ample safe- 912 guards against this evil. The deposit is to be held on trust. It must be paid into a separate account. It must be covered by insurance. The Secretary of State may make regulations on all these matters.
I note that Clause 17 sets out in some detail the information that must be given to the client as to his liability to the estate agent. A Conservative Member referred to the position of a sole agent. I would like to say a word or two about that. I cite the case of an estate agent who is appointed sole agent and the client sells the property through another estate agent. The sole agent in such a case may claim damages for the loss of his commission. Again, where the agent is appointed with the sole right to sell, the agent may claim damages even though the client himself sells without the intervention of any agent. I suggest to my hon. Friend that Clause 17 should be looked at very carefully so that in regard to the matter of remuneration, particularly in the case of sole agency, the client may be left in no doubt about his legal rights.
I raise a further query. Where a deposit is paid to an estate agent and he receives interest, as the law now stands the estate agent is entitled to that interest. I gather that the intention of the Bill is that the client should receive that interest. Yet Clause 14, which deals with this, seems to be confusing. Clause 14(3) provides that where clients' money is kept generally in a client account the estate agent keeps the interest. I hope that that matter will be looked at very carefully.
In my view, the Bill is well drawn, thoroughly comprehensive and covers many matters. I congratulate my hon. Friend and gladly support the Second Reading.
§ 12.38 p.m.
§ Mr. Roger Moate (Faversham)
I congratulate the hon. Member for Enfield, North (Mr. Davies) on his good fortune in securing his position on the Ballot. I also congratulate him on the way in which he moved the Second Reading of the Bill.
My suspicions were aroused first when I realised that there was to be yet another attempt to control yet another sphere of business life. My suspicions were increased when I realised that the éminence grise 913 behind the legislation was the Department of Prices and Consumer Protection and the hon. Member for Norwood (Mr. Fraser) as Minister. My suspicions were aroused further when not one, not two, but three people approached me to ask whether I intended to be here on Friday to discuss this legislation. I thought that I had better have a closer look at it. Having done so, I was agreeably surprised. It seems to avoid many of the pitfalls into which the Minister has plunged us with some of the legislation he has espoused in the past. There is a whole range of legislation imposing controls and regulations on various aspects of business activity in the name of consumer interests. I suspect that, in the end, much of it does more harm than good to the consumer.
I, too, am interested in the welfare of the consumer, and I recognise that there have been many instances of rogue estate agents. The newspapers have over the years been full of examples of individuals losing deposits and so on through the misdemeanours of people calling themselves estate agents. I accept that there is a need to protect the consumer against that sort of criminal activity.
However, consumers can also suffer from over-regulation. Let me give an example from personal experience. When I wanted to sell my house, the established firm of estate agents did not succeed in finding a purchaser. A newly established and, I suspect, totally unqualified agent approached me and sold the house quickly. I suspect that it was probably his first piece of business, and I doubt whether he would have satisfied any minimum standards of competence, but he helped and he gave me, as the consumer, a good service.
The consumer can suffer as much from over-regulation and the closed shop of the establishment getting middle-age spread and over-fat wallets. If young entrepreneurs are prevented from coming in and shaking up the establishment, the consumer may suffer.
§ Mr. Weitzman
The hon Gentleman has agreed that there are bad cases and that people have suffered. How does he propose to protect them?
§ Mr. Moate
The hon. and learned Gentleman cannot have been listening 914 to my speech. I accept that we should prevent abuses, but we must also avoid over-regulation. I welcome the basic philosophy of the Bill because, generally, it adopts the right approach I have one major reservation, to which I shall come later.
It is with approval that I contrast the Bill with the Act dealing with the registration of insurance brokers. That measure required registration, so that brokers effectively had to be licensed and to go through certain processes before they could act as brokers This Bill creates a series of offences that can be enforced via the Director General of Fair Trading. If a person is guilty of an offence, he can be brought to hook. That is a sensible approach which avoids all the bureaucratic dangers of delivering power into the hands of the business establishment.
It might be worth setting desirable standards, but there is always the danger of preventing innovation and stopping newcomers from shaking up the market in a way that is often desirable.
My reservation concerns Clause 20. The Bill certainly deserves a Second Reading, but I do not believe that it should go on the statute book with Clause 20 in anything like its present form. We must be fearful about preventing innovation and Clause 20 provides considerable power for the Secretary of State to lay down regulations that could prevent newcomers getting into the business. This point was made eloquently by the hon. Member for Ipswich (Mr. Weetch).
The clause is badly drafted and provides a wide range of regulatory powers. If one were contemplating going into the business, how could one judge the possibility of doing so by looking at the Bill? We do not know what minimum standards of competence are to be laid down or what body will be established to lay down those standards. Throughout the clause, the key question is left out and the whole matter is to be left to subsequent regulations.
In introducing the Bill, the hon. Member for Enfield, North said that we did not know at this stage what minimum standards should be laid down. However, it is more satisfactory to try to do it now than to leave it to the Secretary of State to talk to the established bodies and 915 then come back to the House with standards which might be excessively high. Such standards would be put to us in a Statutory Instrument and, even under the affirmative resolution procedure, would virtually be a fait accompli. The House would lose effective control over the key question of conditions of entry into the profession.
§ Mr. Bryan Davies
I recognise the seriousness of the point that the hon. Gentleman is making, but the position at present confronting his would-be estate agent is one of open entry, which I understand the hon. Gentleman supports. It would be dangerous to introduce minimum standards into the Bill, because we would be laying down in legislation a range of standards that would surely change over a period of time. Open entry will be preserved until we move gradually, with a degree of flexibility, to minimum standards.
§ Mr. Moate
That is the normal argument in favour of regulatory powers rather than including the provisions in the original statute. The whole thing is getting out of hand. We are producing thousands of regulations and losing our power of scrutiny over them. That is a heartfelt expression from one who is a member of the Select Committee on Statutory Instruments.
I do not believe that we need Clause 20, because the Bill makes other provisions that will make it necessary for a person to meet certain standards before he can enter the profession.
§ Mr. Weetch
The purpose of my intervention is to keep the hon. Gentleman going on this point. May I draw his attention to the fact that Clause 20 enables the Secretary of State to give the authority to lay down specific professional qualifications to a body outside this House which could be the restrictive practice establishment that we are trying to avoid? Is not this a danger?
§ Mr. Moate
The hon. Gentleman is right. I urge the Minister and the hon. Member for Enfield, North to bear in mind that the interests of the consumer are not always best served by having bodies which may look responsible and respectable laying down the rules of entry for the profession. That is a danger.
916 I have no interest in estate agency. No one has written to me about the Bill. I speak as a consumer who wants greater freedom of entry into the profession. Clause 20 leaves wide open all the key questions concerning the future conditions of entry. I say that that is not satisfactory. What is more, that clause is possibly unnecessary because of Clause 15, which lays down very strict conditions and makes it an offence for an estate agent to accept money from clients unless he has insurance.
The word "insurance" requires analysis. It is often misunderstood. In effect, we are not talking about what is normally described as insurance. The suggestion here is for a form of bonding. It is not unknown for estate agents to take out what is called professional indemnity insurance against being sued for negligence. It is not universal practice, but it is often done. Estate agents take out fidelity guarantee insurance in case an employee takes money from his employer or acts in a comparable manner. But I suspect that it is not normal practice for an estate agent to secure a bond guaranteeing the money which he holds on trust for his clients.
The point was made by the hon. Member for Enfield, North when he was asked about this. It is a fairly new form of cover, comparable, I suppose, to the type of bond taken out by travel agents but not on a large scale so far by estate agents. I am not saying that it is not possible. I suspect that it will be secured. If it becomes a legal requirement, there will be a large-scale demand for it, and normally the insurance market always meets a need. I suspect that that will happen in this case.
If an insurance company is to be asked to give a bond to an estate agent, it will make deep inquiries into the financial abilities of that agent and his general reputation.
§ Mr. Moate
Certainly his honesty. Such a bond will not be come by easily, and I suspect that a person who is a "spiv" or a rogue or who appears to be totally inexperienced will find it very difficult to get a bond.
917 I ask the hon. Member for Enfield, North to consider whether it might not be possible to leave out Clause 20 altogether or possibly to modify it so that it does not leave this open-ended commitment to excessively tough conditions. The bond which the hon. Member requires in Clause 15 will be the biggest hurdle of all to the newcomer into the estate agency profession.
That is my major reservation about the Bill. However, speaking generally, the hon. Member for Enfield, North has avoided the dangers inherent in other legislation. I wish only that he and other hon. Members present this morning had been here when we discussed previous legislation such as the Insurance Brokers Bill to speak as I did against the dangers of registration and bureaucracy. The approach of the hon. Member for Enfield, North would have been a much better one in that earlier legislation because it minimises bureaucracy and the dangers of the closed shop.
Broadly speaking, it is right that there should be protection for people who give deposits to estate agents and that there should be separate accounts for clients' funds.
Subject to the important reservations that I have made, which I hope the hon. Member will consider for the Committee stage, I believe that his Bill merits a Second Reading.
§ 12.54 p.m.
§ Mr. Arthur Jones (Daventry)
I add my congratulations to those already expressed to the hon. Member for Enfield, North (Mr. Davies). I have been closely associated with the attempts in this House to get through an Estate Agents Bill, and I notice the common title which has been used in recent years.
The hon. Member has done his homework much more thoroughly than I have. He has discovered that it is 80 years since an attempt was made at registration, perhaps not just for estate agents, but for some of the other business and professional activities, and that there have been 11 attempts to get a measure through the House.
I made my own endeavour in 1966. It was a much more elaborate measure than the one now proposed. I also recall clearly the great disappointment felt by 918 Sir Harry Legge-Bourke in 1963 when he made a similar attempt.
I have to declare my interest as a member of the Incorporated Society of Valuers and Auctioneers and one who is engaged in house building.
I look back again at my own effort in 1966. On that occasion, we managed to get the Bill into Committee. However, I think that it was during the second Sitting of the Committee that we heard that Parliament had been dissolved. As a result, the Bill was lost.
However, I recall in those days, 12 years ago, that it was estimated that 30,000 people were engaged in estate agency in about 7,000 firms. The hon. Member for Enfield, North has not told us what is the measure of the application of his proposals, but those were the figures then. As for malpractices, in 1965 the reported cases of default totalled £114,000. It was thought that that figure might well have been doubled in terms of cases which did not come to public notice or where no conviction was reported, and there must have been quite a number of cases, where persons were reluctant to incur the publicity of taking proceedings against those responsible for misappropriation.
Happily. I do not think that losses on this scale have been current in more recent years. I have not seen any up-to-date information on the subject, but they have not been anything like they were in those days.
I give a warm welcome to the general purpose of the Bill, which is the protection of the public, but I find myself in considerable sympathy with the view expressed by my hon. Friend the Member for Faversham (Mr. Moate).
After my Bill failed, for the reason which I have explained, I came to the conclusion that a simple licensing measure was the way that we could secure the public interest, that anyone wishing to engage in estate agency should be required, as this Bill provides, to enter into some form of bonding arrangement, and that there should be no restriction on entry to anyone who could produce a bond.
The public interest is served provided that there is no loss to the public as a result of the misappropriation of 919 deposits and funds. It was that simple measure which I tried to persuade successive Governments to adopt without success, and it is again left to a Private Member's Bill to tackle the problem.
I recall the hon. Member for Enfield, North saying that estate agency was wide and difficult of definition. There are many aspects of estate agency, so called as a general term. I realise the haziness of the boundary between the professional side of estate agency and the commercial and business side.
§ Mr. Jones
Yes, it is. It is here that it is necessary to leave open an avenue of approach which those who are interested in entering this type of business may take without let or hindrance, providing that they can give the necessary assurance that the public's funds will not be at risk. This will take out of any criteria a judgment by the existing professional institutions and the concept of Clause 20 which my hon. Friend the Member for Faversham questioned.
In that clause the Bill proposes the setting up of some form of examination procedure for entry into estate agency dealing with the purchase and sale of residential property. That contains symptoms which the hon. Member for Ipswich (Mr. Weetch) questions. Once a form of control is established, it becomes restrictive on new entrants to the business.
Some of the most successful estate agents are those who put up a board, opened a shop, dealt with properties on behalf of clients and became well established without any test of suitability in professional terms for entry. I agree that it would be most unfortunate if events developed which precluded that from happening in the future.
I am a little disturbed about the narrowness of the Bill in the sense that it applies only to the buying and selling of residential property. There is a case for its extension to the management of residential property. There is no doubt that rents collected by agents are at equal risk to deposits held by agents. What about the sale of business premises? The risk is the same there. Take the case of someone who wants to buy a shop which includes living accommodation. I 920 hope that the sponsors of the Bill will consider including these provisions in it.
When I tried to get my Bill through there was considerable concern about the protection that was needed for the sale of businesses as going concerns—I am thinking of the purchase of the local post office or grocer's shop, and so on. Why should not the public be afforded protection in this area, too? I should have hoped—this was one of the aims of my Bill—to extend this Bill to industrial and commercial property, and I see no reason for excluding that.
The Bill is a licensing measure, and I should like it to be extended to other areas where the loss of the public's funds is equally at risk. I was a little doubtful about the level of expense involved. It is suggested that the increase in public expenditure will be £600,000, which will include expenditure by local authorities which will be reimbursed through the rate grant procedures. I do not know how the £600,000 is calculated.
The central Government staff involved will number four and locally 60 persons will be involved in 88 areas. Assuming that there are 10,000 firms, that means £60 for each firm. I do not know how checks will be made on such things as apeals that may result on indemnities, on the audit of accounts where necessary, and on matters concerning the Equal Opportunities Commission and the Commission for Racial Equality. All these, it seems to me, indicate a much heavier commitment for public expenditure than the £600,000 mentioned. I shall not venture into the tempting area of rate support grant procedures by which local authorities will be reimbursed for their expenditure.
§ Mr. Moate
My hon. Friend is beginning to worry me again. Surely it is not envisaged that staff will be employed in making up a register of all estate agents and checking their indemnity policies, their standards of competence and so on. Surely the need to consider these matters will arise only if there is an alleged infringement of the law. Surely that should not require even 60 extra staff.
§ The Minister of State, Department of Prices and Consumer Protection (Mr. John Fraser)
That department is now called the consumer protection department.
§ Mr. Jones
I am grateful to the Minister of State for that answer. If there is to be monitoring at all, it will be the responsibility of the local authority to ensure that people are not opening shops and putting up boards to offer services of estate agency without complying with the necessary bonding arrangement under the Bill.
§ Mr. Moate
I hope that my hon. Friend is wrong. It would be helpful to have a statement from the sponsors of the Bill on whether we are right on this matter. If my hon. Friend is right, that would amount to a pre-entry condition which would mean people could not set up an estate agency without being monitored by the consumer protection department.
§ Mr. Bryan Davies
It is important to disentangle the limited area of monitoring, which involves a degree of expense, from the major investigatory powers which are triggered off only as and when an offence has been committed, and a complaint registered. Then the full panoply of the Director General's activity is brought into play. Clearly, the indemnity requirements involve a degree of compulsory monitoring where the estate agent is not exempted from them. But for the vast range of the Bill as it affects the Director General's activities the provisions will come into play only in the exceptionally limited number of cases where an offence is suspected and action is required. It is not, therefore, appropriate to judge the total costs of the exercise against the whole range of provisions in the Bill as they might apply to each of the 25,000 or so estate agents concerned.
§ Mr. Jones
The hon. Member is suggesting that the Bill becomes operative only after the event. Surely any Bill should seek to prevent the loss and misappropriation of moneys by estate agents. If this Bill becomes operative only when 922 someone suspects a loss of funds to the community, that is surely trying to shut the stable door when the horse has bolted. Surely that should not be the purpose of a Bill such as this. The purpose should be to create circumstances in which the loss is minimised and to introduce some form of regulation considerably to reduce the risk of loss. If, as the hon. Member says, the Bill will operate only when suspicions are aroused or when someone has gone off with a few thousand pounds of deposit moneys, that is hardly adequate. I shall be interested to hear the Minister of State's views on this.
For that reason I doubt whether the Bill will achieve its purpose. People could start up in business as estate agents, and who is to question their activity? People go to them to have their houses sold, or they persuade people to give them the responsibility for selling properties. If there is no check on the offering of the service, I doubt the purpose of the Bill as outlined by the hon. Member for Enfield, North.
§ Mr. Bryan Davies
The hon. Member is right that when a client's money is involved there is an obligation to obtain a bond, except where exemption applies. As the hon. Member for Faversham (Mr. Moate) said, that is an important constraint upon the quality of the person opening the estate agency. However, the greater part of the Bill is concerned with other potential malpractices and abuses. Those provisions are triggered only when offences have occurred. They are not part of any concept of the licensing procedure. The Bill provides for scrutiny of the estate agent as and when malpractice comes to light in those other fields. That is why the measure is limited in terms of its emphasis on licensing and also in terms of its demand upon public funds.
§ Mr. Jones
I was hoping to give the Bill fairly unqualified support, but in the context of that remark I do not see that the Bill fulfils the purpose I had envisaged for a measure of this character. I look for a measure to protect the public. I do not see that the Bill can do that.
What does the Bill do, in the light of what the hon. Gentleman says? He says that only reputable agents shall be 923 appointed, that deposit money shall be guaranteed, and that clients' money shall be paid into a clients' account. But surely anyone can set up and start doing that, as people do now, and there is no way in which they can be prevented from doing so. The Bill has no purpose in that regard. That is why I sought to introduce some form of licensing and regulation.
My simple proposition is that if a person can get himself bonded, he can call himself an estate agent. But evidently that is not what is intended at all. It is not until suspicions are aroused, or until it is thought that the agent will scuttle, that the local authority has the right to make inquiries. I had hoped to end on a constructive note. I am not sure now that I can.
§ Mr. John Fraser
Does the lion. Gentleman recognise that there is a good deal of informal control? The hon. Gentleman is a member of the Incorporated Society of Valuers and Auctioneers. If some disreputable person, seeking to enter the estate agency profession, pretended to be a member of the Incorporated Society of Valuers and Auctioneers, quite apart from any deception of the public, the competitors would immediately know and understand that something was wrong. They would also make their inquiries. There is always, in areas such as this, a measure of informal control by the professions and associated professions as well as by enforcement authorities, such as local councils and the Director General of Fair Trading.
§ Mr. Jones
I am sorry to have to correct the Minister, but that is not so. I have never had the experience of someone setting up as an estate agent and maintaining that he was a member of one of the professional institutions. That has never been done, to my knowledge, and there is nothing to be gained by anyone doing that. An estate agent starting in business does not need to associate himself with any institution or any body. We have been able to observe this for many years.
We now find from the discussion that the Bill does not protect the public from those who set up as estate agents. Those who can be bonded will, if they wish to, exhibit the fact that they are bonded, 924 but a person can carry on without exhibiting that fact. As I see it, there will be no sanction against anyone starting business as an estate agent and accepting deposit moneys. I think that there needs to be some form of sanction against people offering their services where it is thought that there is a risk to public money.
I am anxious to be persuaded that I am wrong, but I do not see the Bill in these terms, and I very much look forward to hearing what is said during the rest of the debate.
§ 1.13 p.m.
§ Mr. Ernest G. Perry (Battersea, South)
I congratulate my hon. Friend the Member for Enfield, North (Mr. Davies) on his Bill. He has chosen a subject to which on many occasions in the past hon. Members have sought to bring some regulation. I know that for a private Member to introduce a Bill with 32 clauses and two schedules, dealing with a highly controversial subject, involves an enormous amount of work, research and argument about the best way to do it. I congratulate my hon. Friend on having the strength of will to be able to introduce a Bill of this character.
In 1966 I was a member of the Committee dealing with a Bill the main object of which was to secure the registration of people dealing in estate agency. There were three Committee meetings. Some work was accomplished but, unfortunately, the Bill failed because amendments were introduced to certain clauses which took away the right of estate agents to deal in property as well as to be estate agents. I well recall the controversy which took place in that Committee on this issue. I am sure that the hon. Member for Daventry (Mr. Jones), who was also on that Committee, will recall the fate of that Bill. Luckily for us, a General Election took place soon afterwards. What finished the Bill, however, was the fact that it sought to place restrictions upon the conduct of the business of estate agents.
The Bill now before the House, like many others recently introduced from each side of the House, deals with consumer protection. In the past few years we have had measures dealing with consumer credit and with insurance brokers. It should be remembered that the Insurance 925 Brokers (Registration) Act 1977 came into force mainly because of insurance disasters such as that involving the Court Line. Tens of thousands of people lost practically all the money they had put into various concerns. They had been advised to do so by bank managers, insurance brokers and so on. The resulting measure was an aspect of consumer protection.
What worries me is that, whenever we introduce measures of this sort, somehow in the end they do not seem to fulfil the job that we want them to do. I was reading only this week in the report of the Ombudsman—an office which Parliament introduced as another form of consumer protection—his suggestion that any member of the public should be able to report to him without having to go through a Member of Parliament. When I read that, I immediately wondered whether this was another attempt to build up a nice big empire, with huge numbers of civil servants and staff.
My experience in the House and my experience in the insurance business have convinced me that some sort of regulation of estate agents is necessary. Well over 75 per cent. of estate agents today are in some form of organisation seeking not only to protect themselves but also to protect the people with whom they do business. For that one reason, I join to some extent with the hon. Member for Daventry in saying that in some respects the Bill does not go far enough.
Is licensing registration? That is the point. The mere fact that someone has a licence to act as an estate agents does not mean that he has registration. Some sort of registration is necessary not only for the protection of the public but also for the protection of the estate agent.
In my own area, in the London borough of Wands-worth, and particularly in Battersea, I have had dealings with many estate agents. Nine times out of 10 I have found them trustworthy, reliable and honest in their dealings with their clients. For this reason, they are the people who need protection.
The Bill introduced in 1966 failed because some people wanted to stop estate agents themselves dealing in property. For about 75 per cent. of the population the purchase of a house is the biggest financial transaction in which they are involved in their lives. When a person 926 wishes to buy a house, perhaps after saving some money in a building society, he is embarking on the biggest transaction in which he has ever been engaged or is ever likely to be engaged. He goes to an estate agent.
I have always been puzzled as to whom the estate agent represents. Does he represent the vendor of a house who says to him "I want to sell my house. Will you take it on for me?" Then, someone who wants to buy a house goes to the agent, seeing the agent as his representative, and says "I want to buy a house. What have you got to show me?". Here we have someone in between two people, one of whom wants to sell and one of whom wants to buy.
From my experience, it has been known in the past that unsuspecting sellers of houses have gone to estate agents and been conned. I know of one case concerning a large estate agency in Wands-worth. The agency is not a member of any of the recognised estate agency associations. People could ask the estate agent to sell a property, and he would not be backward in persuading them, after a long time, to sell their houses at much reduced value.
I shall give an example of that. In the 1950s I knew a widow who had a nice house in a very nice part of South Battersea. Unfortunately, she had a tenant upstairs in her house. She went to the estate agent, who could see that the house was worth, in those days, about £7,000. He said to the widow "You have got people upstairs. That is not very good. I can offer you only £2,000 for your house." In the end, because of the frustration of the widow, the agent sent along a nominee of his own—an unscrupulous estate agent can do this—who persuaded the widow to accept £2,000 in cash for her house. There are possibilities of estate agents being able to exploit people who do not appreciate the value of property and of their own house.
Of course, the tenant upstairs was offered a flat somewhere else, and the house was sold for £7,000. That sort of thing can go on with estate agencies. However, I stress that that is the exception and that nine people out of 10 engaged in estate agency are reliable and honest.
We are dealing with a matter of consumer interest and protection. If the Bill 927 is to be a success, it is essential that we have some sort of registration of estate agents. Licensing is not good enough. As has been said repeatedly in this debate and previous debates, anyone can set himself up as an estate agent. In the same way, when we were discussing legislation on the registration of insurance brokers, anyone could set himself up as an insurance broker.
I feel some sympathy for members of the different institutions dealing with estate agency, because a small percentage of estate agents will not play the game. We talk about the need for competence in order to work in estate agency. I cannot speak on behalf of those engaged in estate agency, although I know a number of estate agents. However, I am sure that the various estate agency organisations, combined together, could run very useful schemes to make sure that the staff of estate agents and people wishing to operate on their own could have some form of internal education in the matter, so that they could be promoted later to being estate agents proper. I am sure that they are capable of doing that. Many similar professions have set up schemes to educate their members in various matters. That is something that the estate agents ought to look into very carefully.
Does my hon. Friend the Member for Enfield, North intend in the Bill to restrict the activities of estate agents in dealing in property? Does he believe that an estate agent, who has people coming to him to sell houses and people coming to buy houses, should at the same time be dealing in property himself? Should he be buying and selling property? Does my hon. Friend consider that that is compatible with the best interests of the public and of estate agents? That question must be answered.
My hon. Friend restricts the Bill to some extent to residential property. I want to develop a point made by the hon. Member for Daventry. In places such as London, where trade goes on, there are shops. Many of the shops in my constituency has residential accommodation above them. Many of the shopkeepers live in that accommodation. Is my hon. Friend prepared to amend the Bill so that such premises would be termed residential property in relation to the buying and selling of shops and the like? That is 928 another point that we shall have to consider. In inner London there are thousands of such places.
Clauses 3 to 7 deal with orders by the Director General of Fair Trading. I do not doubt that the Department of Prices and Consumer Protection, in its wisdom, thinks that the Director General is the person who should handle the questions of someone's deposit not being returned to him or of someone else absconding with his deposit. There have been such cases recently.
The word "fraud" is used in the Bill. Will a vendor be able to appeal to the Director General of Fair Trading if he thinks that an estate agent should have got another £1,000 for him? What do we class as fraud? On the other hand, would a purchaser think that he had been robbed if he had paid £15,000 for a house on the advice of the agent and then found that it was worth only £13,000? Would he be able to say to the Director General "Is this fraud or is it not fraud?" He had accepted advice from an estate agent, but then found that the person next door paid £2,000 less for his house. Would the fact that a person had got a bad piece of advice from an estate agent constitute fraud?
All these questions will have to be dealt with in Committee. I hope to have the privilege of serving on the Committee with several of my hon. Friends who have from time to time rendered valuable information on these matters. We shall have to determine whom the estate agent represents and whether he can be convicted of fraud in a perfectly innocent sale or purchase arrangement.
Clause 20 deals with standards of competence. I have covered the matter to some extent by my reference to estate agency organisations. I am sure that they are able to educate their members and staff along proper lines in their business.
We have heard some odd phrases in the debate. I think it was my hon. Friend the Member for Ipswich (Mr. Weetch) who mentioned "coffin-chasing". I have heard the phrase "death hunter" and the phrase "as bent as a hairpin" Such phrases are applied to many service industries and to people such as undertakers, insurance agents and estate agents As an insurance agent, I was classed in 929 this category. I have been called a death hunter and all sorts of things. I do not take offence about that. Let us he frank about it.
When I speak of someone as bent as a hairpin, I am not looking at anybody in the House. Such an expression may apply to 5 per cent. of the people engaged in those occupations. Ninety-five per cent. are as honourable as the public want to let them be. I have confidence that the regular estate agent who has built up a career in a particular area and has served the public requires protection by some form of registration and licensing. I hope that the Bill will go along those lines.
The debate has been very interesting. I congratulate my hon. Friend. He has embarked on a task that will not be easy. I hope to be with him to help deal with the problem and see the Bill become an Act.
§ 1.30 p.m.
§ Mr. Michael Neubert (Romford)
I join other hon. Members in congratulating the hon. Member for Enfield, North (Mr. Davies) on introducing the Bill and on the clear and coherent way in which he expounded it. I envy his good fortune in the Ballot. The law of averages has smiled benignly on Government Back Benchers this Session. If in addition the hon. Gentleman has been able to secure the support and assistance of the relevant Government Department, more power to his parliamentary elbow.
As this is a Private Member's Bill, any views that I express from the Opposition Front Bench must necessarily be my own. Having listened to the contributions from the Conservative Benches, I do not think that they will be far distant from those of the majority of my colleagues. However, after the speech of my hon. Friend the Member for Daventry (Mr. Jones), who is very authoritative on these issues and whose efforts in this area are to be commended, I think that there is a danger of a dialectical entanglement between him and my hon. Friend the Member for Faversham (Mr. Moate), because what gives rise to the concern of my hon. Friend the Member for Daventry might well be one of the features of the Bill that appeal most to my hon. Friend the Member for Faversham. I hope that the sponsors will 930 succeed in pleasing both my colleagues in that respect.
The hon. Member for Enfield, North is particularly to be congratulated if, as we are told, it is 90 years since the first attempt to regulate estate agency. It is a long time for an idea finally to find its hour, but now that it has come this far I should think, without offering a hostage to fortunate, there is a good prospect of the Bill's becoming law. In the days and months ahead the hon. Gentleman might turn his attention to other long-established, deep-seated intractable problems, such as the Irish question, which has been even longer before the House and remains unsolved.
The Bill can be seen as part of a pattern of professions wishing to enhance their reputation with the public and strengthen their standards, and needing a greater sanction that can be conferred by this House. The traditional professions of medicine and law have been followed in recent years by credit brokers and insurance brokers.
Within the limits of the minimum conditions that it outlines, the Bill seems to me to strike a happy balance between two extremes, to maximise commercial freedom and access to the profession and limit administrative intervention. There is a great deal to be said for that.
I believe that one of the reasons the Government decided against introducing the kind of licensing system they outlined in their Green Paper in November 1975 was that as a result of their experience of the Consumer Credit Act they thought the present proposals would be preferable. Without touching on the question of that Act, I may perhaps say that I regard that as a good argument. The inference must be that such a system would be too costly and too bureaucratic.
The present proposals are greatly to be preferred. The present position is a free-for-all and expensive for some. That is not satisfactory. But we do not want to go all the way towards a much more stringent, tighter, more expensive system of regulation such as would involve a Government Department.
There is a national interest in the success of the Bill. If it encourages greater efficiency among estate agents, that will be a help in one very important way. We have the irony that, when the number 931 of houses available exceeds by hundreds of thousands the number of households, we still have areas of acute housing shortage. If we could encourage estate agents to be more efficient in bringing together prospective house sellers and prospective house occupiers, that would make a contribution towards dealing with that great social problem.
It is a familiar proposition that house purchase is the major transaction of most people's lives. It follows that people generally are very inexperienced. Although I am told that on average people change houses every eight years, the experience thus gained is of no advantage to the first-time buyer, and in any case experience can be very painfully acquired.
That may be why the emphasis in the Bill is on residential property. My hon. Friend the Member for Daventry rightly suggested that a better Bill might have taken in business property or even the sale of businesses as going concerns. But I suspect that there are two reasons for such a matter not being included. One is that it would be difficult of definition, and the second follows from that.
If it were difficult of definition, it would make for a much more complex Bill and might threaten the chances of this more limited measure going through the House this Session. I imagine that priority was given to residential property because it is there that protection is most needed, among individuals. People dealing in business property might be expected to be rather more experienced in the ways of the world than individual prospective householders are.
The Bill proposes six minimum conditions. The first is that moneys should be paid into a client account. That seems to be eminently reasonable, because the money is not strictly the estate agent's. It is given to him on trust as part of a projected transaction that is not certain of conclusion.
Secondly, the Bill proposes that those moneys should be safeguarded by insurance or some other form of indemnity. Thirdly, it says that there should be a statement of charges. That is becoming common practice and is regarded by anyone engaged in business as a completely reasonable requirement. Only 932 this week a similar order was imposed on hotel keepers. No one should question that before entering into a transaction people should know their liability and the likely charge.
My hon. Friend the Member for Birmingham, Stechford (Mr. MacKay) expressed fears about what he called "spiv" estate agents who went knocking on doors. That problem may be overcome by a general trend in Europe to impose conditions on doorstep transactions. Those conditions provide for a cooling-off period, a period of reflection in which the person concerned can think about whether he has made a wise decision, instead of being hustled irrevocably into a contract that he may subsequently regret.
The fourth proposal in the Bill is to put a limitation on deposits pre-contract, not to outlaw them entirely. I am with the lion. Gentleman in believing that we should not seek to outlaw them, but perhaps the amount of the deposit should be restricted.
The fifth proposal is that there should be a declaration of personal interest by the estate agent. With the hon. and learned Member for Hackney, North and Stoke Newington (Mr. Weitzman), I regard that as being of prime importance, because if an alert person is to be able to assess adequately the bargain that is being offered to him, he must know where the interest of the agent lies.
The hon. Member for Battersea, South (Mr. Perry) made a good point when he said that it was the ambivalence of the agents' attitude that caused much of the problem. Who is to say whether the estate agent is acting for the seller of the house or the buyer? It is a problem with which estate agents have to live. It is to the credit of the hon. Member for Enfield, North that he did not attempt to make our blood run cold with a catalogue of horror stories about estate agents.
It is very much to the credit of the profession that it is in support of this Bill. I believe that the three major professional institutions—the Incorporated Society of Valuers and Auctioneers, the National Association of Estate Agents and the Royal Institution of Chartered Surveyors—welcome the Bill. That is evidence of at least 70 per cent. of the profession. Further evidence has been 933 given to the effect that those outside the professional bodies also welcome the Bill. We have a profession which realises the need to regulate its own affairs, which approves the principle of self-regulation which is largely involved in the Bill, and which hopes that standards will be improved as a result.
On the other hand, it is fair to point out that over the years estate agents have, as a result of one or two misdemeanours on the part of a minority in the profession, earned themselves an unfavourable reputation. Most hon. Members have been dealing today with the rogue estate agent. I should like to see the Bill go further, not in the sense that others have spoken of, in terms of the provisions of the Bill, but in terms of my ambitions for it. I hope that it will lead to a general strengthening of current practices.
What I have in mind is the extraordinarily casual approach which some agents adopt to the question of buying and selling houses. As an individual I have found, for example, that an estate agent will not want to value a house placed with him for sale. It might be imagined that it would be part of the professional service given by an estate agent to give the seller, who has no experience of the market, an idea of the value of the house.
Often that is not the case. A buyer is asked to put his own value on the house. We all have a higher opinion, not only of ourselves but of the value of our property, than is sometimes justified. In many cases the price put on the property will be above what the market will bear. In consequence, the property will languish unsold for months because it is overpriced. The estate agent is not doing his client a service by failing to give professional advice about the selling price.
Let me give another illustration. I have no horror stories, but I can recount a recent personal experience of estate agents coming in for justifiable criticism. This incident relates to a piece of land near my home which is currently for sale for development.
A neighbour inquired of the estate agent about the land and was told the price of it and that there was no problem about permission to build. At present there is no current permission to develop that land, the original outline 934 permission having lapsed after three years during which time no fewer than three detailed applications had been rejected by the local council as a result of local objections. To say that there was no problem about permission to build was not strictly true. It was perhaps halt true. It was not the complete truth and is not the type of full advice that I would like to see an agent giving to a prospective purchaser. There may be different reasons for this type of inadequate advice. Sometimes it is due to over-enthusiasm, sometimes it might be an immature idea of salesmanship, and on a very few occasions it might be a deliberate attempt to deceive. That is what concerns most hon. Members.
The last and most important of the six minimum conditions laid down by the Bill is the question of minimum standards of competence. I am with my hon. Friends in hoping that account will be taken of relevant experience as opposed to academic qualifications. In many ways I should like to see greater emphasis placed on experience rather than on qualifications, because this is an area in which experience counts for a great deal. The skill that is acquired in dealing with property and people must be invaluable.
My hon. Friend the Member for Chelsea (Mr. Scott) spoke of the recent problem of gazumping. This certainly seems to be worthy of exploration. It may require a widening of the concept of contract to deal with this problem. With a house sale, when the contract is not complete until the legal documents are exchanged, there is need to ascertain whether it is an unfair practice to bid up the price at a time of shortage of housing and ample mortgage moneys available.
I have some doubts and reservations about the Bill. The first is that, in common with many measures that come forward these days, the Bill contains enabling clauses providing for regulations subsequently to be introduced to the House. It is a common feature of parliamentary life that proceeding by order in this way is inadequate for the proper scrutiny by Back Benchers of what is proposed.
I invite the Minister to consider advancing the drafting of such regulations so that we may at least know what 935 is in his mind when the Bill is in Committee. Although it is true to say that we can accept the principle of the Bill, it is often the case that the regulations deal with the detailed implementation of principle and one cannot necessarily approve the principle in Committee without knowing what will be required by way of regulation.
This Bill is very much a compromise. It is important to know in good time the degree of stringency which will be imposed by the regulations. This applies not only to the accounts and auditing of the accounts when clients' money is held but to pre-contract deposits and to standards of competence as set out in Clause 20. I hope that in Committee we shall have some clear indication of Government thinking in these areas.
There are two specific points which have been raised with me by interested bodies outside the House. The first has been raised by the Consultative Committee of Accountancy Bodies, which is concerned about the wide definition of estate agents in estate agency work. It feels that some of its members might be captured in the net in two ways. First, they might be caught in the ordinary course of their business discussions when giving advice which might bring together clients as prospective purchasers or sellers of property in a manner quite incidental to their general business.
Secondly, members of the accountancy bodies might have to act in a fiduciary capacity in trust and might be involved as executors in the sale of a house. Would they be caught by this definition? Obviously, it would not be within the intention of the measure, even though the hon. Member for Enfield, North suggested that the Bill should cover a wide range of people who might be said to be engaged in this type of transaction.
I raise a second specific point as a vice-president of the Association of Metropolitan Authorities. It relates to the all-important cost of enforcement. The Association's view is that the Bill is fine but it is yet another example of the Government transferring responsibilities to local government. It makes the point, with which many of us have great sympathy, that the willingness of Governments to transfer responsibiliies to local authorities has not in the past been 936 matched by an equal willingness to provide funds to perform the services transferred to everyone's satisfaction. The Association hopes that not only will the increased expenditure be taken into account in assessing the rate support grant but that authorities will be reimbursed with the extra costs of the service if it is to be imposed upon them.
My most serious reservations relate to sanctions, and the powers that will be conferred on the Director General. I am sure that this point will be the subject of considerable scrutiny in committee. It is true that the Director General's powers are the deterrent sanctions in the Bill. There is no specific sanction against abuse other than the threat of not continuing in the profession which my hon. Friend the Member for Daventry considers is not quite enough. Nevertheless, the powers appear to be stringent, and they will have to be examined closely.
Clause 10 provides that duly authorised enforcement officers shall have powers of entry and inspection. There may well be precedents for this, but it is none the less repugnant for that. To allow authorised officers to enter premises and seize relevant books or documents, andto break open any container and, if that person does not comply, break it open himselfis rather brutal phraseology which is somewhat alien to the easy-going British way of life. There are other illustrations of this, such as the VAT inspectors, but these provisions are not liked by the House, and I wonder whether this is necessary.
Under the Bill the only places that would be excluded would be dwellings that were used as dwellings exclusively. It does not exclude what are described as "mixed hereditaments"—a mixture of business premises and dwellings. Admittedly, there is a stipulation that entry shall be at "reasonable hours" and on production of credentials, but hon. Members will want to examine this matter.
My final reservation is the reference to sex and racial discrimination. Is it entirely necessary to have such special provisions? It means that if one is found guilty of discrimination in either of these areas, in addition to any normal penalties under the original Acts, one will suffer, as a result of this Bill, the further penalty of the risk of losing one's livelihood. 937 That seems inequitable. Why should estate agents have a further risk and be subjected to further sanctions? Is that entirely justified?
With those general reservations, I join other hon. Members in welcoming the Bill and wishing it well. I know that the professional institutions feel that its provisions should not be taken as the Director General's seal of approval of anyone practising as an estate agent. For example, the certificate of registration in relation to the insurance of clients' money should not lead people to believe that it is a safeguard against all risks in dealing with estate agents. Consumers will still have to have their wits about them, and that is how it should be. The responsibilities of the public as consumers in this area will remain, but the Bill will give the profession a great chance to improve its standards and enhance its reputation. For these reasons, I wish the Bill well.
§ 1.55 p.m.
§ Mr. Michael Ward (Peterborough)
It was not my intention to support my hon. Friend the Member for Enfield, North (Mr. Davies) today other than by my physical presence in the Chamber for what I believe is an important and useful Bill. However, I have been encouraged to speak by the welcome support that has been given to the Bill by the Opposition Front Bench, underlining the fact that all political parties are in favour of this measure. That is very welcome. I apologise to my hon. Friend the Member for Enfield, North for not being here for his opening speech, but I was delayed by a matter arising from the Unfair Contract Terms Act which will help in areas of estate agents' negligence and of misrepresentation.
In the three years that I have been a Member of the House I have not had one complaint about the activities of estate agents. Obviously, that shows that estate agents in my area operate to very high standards. I note that there is rather more criticism than actual complaint about the activities of estate agents. I know that the Consumers Association and certain consumer advice centres have records of bad practices and that there have been one or two examples of blatant fraud. However, in general estate agents suffer more from public criticism, perhaps not well founded. They have a poor 938 image in the public eye. The Bill may do much to rectify that.
I welcome particularly the fact that the measure does not go in for massive registration procedures affecting everyone practising in this field. It will be highly selective in that people who misconduct themselves, criminally or as otherwise laid down, will have a label put around their necks for all the world to see. That is the best way to tackle the problem.
I was interested in the remarks of my hon. Friend the Member for Ipswich (Mr. Weetch) about the need for opening out the way in which property transfers are made. This could be a subject for much broader debate, and it is at present being considered in other quarters. If that process develops in the next few years, the Bill will become all the more important. We must introduce more controlled regulation of the way in which estate agents conduct their business.
The Bill does not deal with some of the matters raised by hon. Members. For example, it does not deal with the difficult question of gazumping—people taking advantage of the change in price during a period when they are negotiating a property transaction. It is the very nature of house transactions which is partly to blame. The long delays with solicitors do not help the situation. In the public eye, estate agents sometimes take the blame if their transactions are involved in gazumping. The fault is in the system itself.
I hope that we shall see an open-minded approach by estate agents to other options, particularly the option of title insurance which offers the assurance of a speedier and more secure financial basis for the transaction. It is probably the estate agents themselves who have closed minds in some circumstances. Often they have close relationships with particular building societies and solicitors. I hope that the Bill will bring about a development of estate agency skills, and also of open-mindedness among estate agents.
The heart of the Bill is its attack on the very worst kinds of fraud. Very little has been said about the bad cases and the terrible situations that cause great heartbreak and distress. I notice that today in the Estates Times there is a report that a man in Salford, an agent, was 939 gaoled for two years for stealing £14,000 from building societies and £5,500 from depositors. It was such a case which alarmed many people two years ago and prompted the National Association of Estate Agents to make public a particularly bad lapse, of which I should like to give the House details.
It was reported in the Brighton Evening Argus in 1976 that a Mr. Jack Taylor admitted being involved in fraud with others. He had been operating an "estate agency" in Croydon, was convicted at the Old Bailey for cheating flat-hunters out of a reported £34,000 and was gaoled for seven years. In the same report it was stated that Taylor had twice previously been declared bankrupt and that he had also been gaoled for six years after admitting obtaining £160,000 by forged documents.
Later in 1976 the same Brighton newspaper reported that the same man, together with another man, had pleaded guilty at the Old Bailey to conspiring to defraud people who were induced to pay deposits to Goodwin, Taylor and Piggott, of Green Lanes, Stoke Newington. It was reported that some £46,000 in deposits was unaccounted for. Taylor was gaoled for a further five years. Apparently, he was released on parole from a three-year gaol sentence a few years ago and was found a job by the Pentonville Prison authorities with a crooked estate agent. Immediately he was released, Taylor had started another fraudulent estate agency business. Bankruptcy orders had already been made against him, and a situation also arose in Coventry involving the same man.
§ Mr. Arthur Jones
In regard to the matter to which the hon. Gentleman draws attention, does he believe that the Bill will prevent such a case recurring?
§ Mr. Ward
Such matters would have to come to the notice of the Director General of Fair Trading, who will consider such people's status. Undoubtedly that man would have a label hung around his neck if this measure were passed into law. He had been remanded in 1974 but continued his activities for a long time afterwards. Earlier he had twice been declared bankrupt and had been convicted of fraud.
940 I believe that the Bill will help us to prevent the worst case of fraud and criminal activity. Therefore, I welcome this measure and hope that it will be successful in making speedy passage through the House.
§ 2.2 p.m.
§ The Minister of State, Department of Prices and Consumer Protection (Mr. John Fraser)
I wish to congratulate my hon. Friend the Member for Enfield. North (Mr. Davies). first, on his good fortune in the Ballot and, secondly, on the way in which he has framed his proposals. The Bill is a long overdue measure, and I welcome it not only as a consumer Minister but as one who in earlier times has attempted to put legislation through the House on this subject. Indeed, four or five hon. Members concerned in this debate have made unsuccessful attempts to reform the law.
My hon. Friend is to be thanked for his approach to a complex matter, and I believe that he has got it about right. He has also achieved a remarkable coalition of support. When legislation on such matters as this is proposed, Members sometimes receive letters from profesional bodies saying "Vote for the Second Reading of the Bill". Sometimes they receive letters from consumer bodies saying the same. However, it is unusual to be faced with the situation which has occurred on this legislation, namely, of receiving support not only from consumer organisations but from profesional bodies. That is a credit to the way in which my hon. Friend has brought his proposals together.
Speaking as a consumer Minister, I feel that often a synthetic difference is generated between the interests of the profession and those of the consumer when in fact their interests coincide. The public want honest reputable agents for their protection and the agents want honest reputable colleagues because that protects their reputation and their business.
I wish to deal with a number of the points which have been raised in the debate. A parallel has been drawn with accountants. I do not think that accountants in giving advice to a vendor on a purchase would be acting as estate agents and would fall within the definition of Clause 1. However, if an accountant set out to conduct the activities of 941 an estate agent while calling himself an accountant, he would be caught by these provisions.
I should not have thought that he would be caught by the definition of "estate agency" if he were acting in a fiduciary capacity. An accountant who acts as a liquidator or as a trustee in a bankruptcy or trust fund is acting as principal when selling property. As a liquidator he acts in the name of the company. He is not in the business of introducing third parties to each other but is in the business to dispose of the assets. It seems to me that nobody acting in a fiduciary capacity as trustee or liquidator would be caught by the definition of "estate agency" in Clause 1.
On the question of cost, I have a responsibility in such matters as this to advise the Treasury how much the Bill would cost. I took the precaution of discussing this matter with local authority bodies, and I obtained an estimate of the cost involved. These figures have been provided to my hon. Friend and have been included in the Explanatory and Financial Memorandum to the Bill. They are accepted and agreed by the local authorities as being reasonable estimates of how much this measure will cost. If the Bill is passed, the Government will make sure that the estimates are included in discussions on rate support grant so that local authorities do not have the duty imposed on them without the resources to carry it out.
The scope of the Bill has been mentioned. Everybody appears to agree that it should apply to residential accommodation. The hon. Member for Daventry (Mr. Jones) and others have advocated that the measure should be extended. However, there are problems about trying to legislate in too wide an area by means of Private Members' legislation. I understand that the sale of a business with residential accommodation above—for example, a flat over a self-contained shop—would be caught by the definition provisions.
§ Mr. Weitzman
The Minister said that such a matter would be caught by these provisions, but if he examines Clause 2 and looks at the latter part of it he will see the wordsfor the purposes of this subsection any land which is, or is intended to be, occupied and 942 enjoyed with a dwelling shall be treated as part of the dwelling.But that relates only to the first part, which refers to land whichwholly or to a substantial extentconsists of dwellings. It does not seem to apply to existing cases where there is a shop with residential accommodation.
§ Mr. Fraser
I understood that it did so apply, but I have no doubt that that matter can be explored in Committee.
In respect of abuses, it is right to say that there has been a calm approach to the problem which has been created by some estate agents. But from my experience in my constituency in South London I have heard of the most appalling cases of defalcation of deposits. Latterly such abuses seem to have died down. However, there is no certainty that they will not return in a future property boom. The fact that there are not many complaints at present is no reason for not proceeding with legislation now.
The complaints that mainly arise relate to losses of deposits. Such losses are not necessarily caused by dishonesty by estate agents. An estate agent who fails to keep a client account can quite innocently, with no criminal activity, become bankrupt. That can happen as a matter of pure misfortune. But the fact that he is not keeping a client account means that the depositor's money is mixed in with his own. Therefore, members of the public can lose even if the estate agent has not been dishonest.
Secondly, there are difficulties in respect of estate agents who have an interest in property which they are buying or selling. An estate agent could be a director of a property company and may not disclose that interest to a prospective purchaser. That is wrong. It is equally wrong when an estate agent acts for a vendor and then introduces a purchaser who is covertly an agent, so to speak, for the estate agent. That is an abuse which could be cured by disclosure of interests to the prospective users of the estate agency service.
Finally, it is wrong that people should be persuaded to use the services of an estate agent on conditions that are unfair or oppressive. As with other commercial services, the customer should know the 943 cost of the services before he embarks on a purchase.
Gazumping is a difficult area in which to legislate. I believe that the Conservative Government referred the question to the Law Commission, which could not come up with any workable proposals that would stop the practice. The difficulty about dealing with gazumping in the Bill is that it is done by the vendor, not by the estate agent. If an estate agent tried to dissuade a vendor from accepting a higher bid or suppressed the existence of a higher bid, he would be in breach of his duty to that vendor. It is not too difficult a problem at the moment, but it would be extremely difficult to deal with it in the context of estate agency since, in effect, estate agents do not have responsibility for the practice.
The Bill will deal with some of the abuses mentioned in the debate. The Government welcome the approach because it attempts to deal with the stamping out of abuses and malpractices of a few—those who give estate agents a bad name—and it allows existing professional associations to extend and develop their existing system of self-regulation. I understand that about 70 per cent. of estate agents are covered by membership of the three big professional associations—the Royal Institution of Chartered Surveyors, the Incorporated Society of Valuers and Auctioneers and the National Association of Estate Agents. These bodies have much improved their methods of compensation quite recently. Although there is not unanimity among them on all matters, complaints about their members' activities are not very high in number, and they should be encouraged rather than circumscribed by a bureaucratic system of licensing.
My hon. Friend the Member for Enfield, North has it right by building on the good practices that those bodies have built up themselves rather than trying to impose a new layer of control on the regulation that exists. He is also right to concentrate on the "cowboys" of the professions, and I know that his efforts are welcomed by all respectable elements in the estate agency business as well as by the general public and the consumer organisations. His approach removes the need for a comprehensive system of licensing.
944 The Government proposed licensing in a Green Paper issued by my Department in 1975. What my hon. Friend has done is to do away with licensing and to go for a system of negative licensing, as it were. In ordinary language, anyone can carry out the business or profession as long as he does not break the law, but once he breaks the law he can be disqualified from practice. It is the right approach that anyone can go into the business provided that he does not breach the basic safeguards introduced for the protection of the general public.
There has been argument about registration. My understanding is that the Bill does not involve any formal system of registration either. That removes the objection even to registration. What it does, however, is to introduce a system of both informal and formal control. I have tried to describe the sort of informal system that exists. How will it work in practice?
If someone sets up as an estate agent, immediately a number of bodies, official and unofficial, will look at that agency. Solicitors who deal with the agent will ask themselves "Does he have an accountant's certificate and a bond?". His competitors will ask the same question. His banker will probably ask "Where are the separate office and client accounts?". The building societies—it is difficult to be a successful estate agent unless one has a source of finance—will ask "Where are your bond and your accountant's certificate?".
There will be that system of informal control, and there will be also a formal method of monitoring and enforcement by local authorities, in the first instance, and by the Director General of Fair Trading. I think that that combination of the way in which the business world works, backed up by the local authorities and the Director General, is more than adequate as a substitute for a detailed system of licensing, fitness tests and so on such as under the Consumer Credit Act.
§ Mr. Arthur Jones
What circumstances does the hon. Gentleman envisage which differ from those which operate today?
§ Mr. Fraser
In this respect: at present a man can set up in an agency and he need not keep a client account, need not keep a bond, and need not belong to a compensation fund.
§ Mr. Arthur Jones
The hon. Gentleman is arguing that a solicitor and the bank would make the inquiries. But they may well make such inquiries today, and they would be prudent to do so. There is no requirement on them to do so. I think that all the external pressures that the Minister suggests could well operate in present circumstances, and probably do operate. Nevertheless, we experience these misappropriations.
§ Mr. Fraser
Certainly, every prudent solicitor would make enquiries into the bona fides of an estate agent setting up in his area of practice. He would want to do so with a view to advising his client whether to pay a deposit to that agent But there at present no way of his learning that an agent does not keep a client account, or example. If the solicitor learns that an agent is not a member of any indemnity scheme and has not a bond, he can advise his own client not to make a deposit. But it stops there at present.
In future, if an estate agent sets up in business, the solicitor, building society or competitor will not only ask "Are you a member of the bonding scheme or do you possess insurance?". If the estate agent does not have a bond or an accountant's certificate to display, they will not only give advice to their clients and their colleagues but will also, no doubt, inform the local authority trading standards department or the Director General of Fair Trading, so that appropriate action may be taken. Thus, their inquiry will trigger off the disqualification of that person from business.
I am not saying that the Government see this solely in terms of informal enforcement, because they do not. But the informal control by the business community allied with the formal inspection and control powers in the Bill are, in the Government's view, an adequate combination. They will be complementary and will work rather better than a system of licensing of the sort that we have in the Consumer Credit Act.
I hasten to add that that is not a criticism of the Act. I am sure that Conservative Members who introduced it would not want to say that either. But we do not believe that the full licensing system that is necessary under the Act is necessary in this area. It would create 946 a great deal of extra public expenditure and extra posts in central and local government. That is unnecessary. I am pleased that, at a time of restraint on public spending, my hon. Friend has chosen this method of control rather than a more bureaucratic one which presumed that everyone was unfit to practise until he had obtained a licence so to do.
I think that my hon. Friend has the definition of "estate agency" right. He is right to exclude builders. Control of builders through the National House-Builders Registration Council scheme is the best way to do that. In any case, the builder is not acting as an agent but as a principal. The exclusion of solicitors is also right. That is not in any tender defence to the legal profession, but I understand that every solicitor in England, Wales and Scotland already has to keep a client account and there are severe penalties for not doing so. All solicitors also have to be members of the compensation fund. I understand also that in England every solicitor has to insure with the Law Society against negligence. Therefore, all the controls that my hon. Friend is introducing in the Bill already apply to the legal profession and it is, therefore, unnecessary to include it.
It would make the Bill too complex to try to include control of management—that is probably more appropriate for a Housing Bill. I known that the Department of the Environment is hoping to bring forward proposals for more effective legislation to deal with abuses by managers of property.
If an investigation by the Director General is triggered off by one of the events specified in Clause 3, the Director General, in taking a rounded judgment, would be able to look at the other activities of the estate agent. But mere wrongdoing in relation to management would not of itself trigger off the event. If there had been a criminal offence or a breach of practice specified by regulation, the Director General could look not only at that but at the other activities of the estate agent as well.
Clause 3 gives the Director General the power, as an ultimate sanction, ti strike off an agent from practising altogether. Some hon. Members have suggested that this is too severe a sanction. I think it might be wise for the Committee to look into this to see whether there 947 could be a half-way house between the requirement to cease practice altogether and no penalty being imposed by the Director General. Perhaps there should be a half-way house between those two. I am sure that the Committee could look into it.
The hon. Member for Birmingham, Stechford (Mr. Mackay) raised the question of sole agency. I do not think that it is necessary to include anything on that in the Bill because, if the sort of practice which he described took place, the Secretary of State could make a regulation under Clause 3(1)(d), there being power to declare by order that certain practices are undesirable. I imagine that the one described by the hon. Gentleman would be a prime candidate for description as an undesirable practice under that procedure.
The Government believe that the administrative controls provided by the Bill, subject to proper safeguards, are to be preferred to a more rigid system of legal control by the courts in complex areas of regulation such as estate agency work. The Government are impressed by the system of controls which my hon. Friend has developed, and we think that they represent an acceptable solution which brings both justice and effectiveness.
I turn now to the question of religious objection, which was raised by at least two hon. Members. I know of this from my own surgeries. I am aware that there are a number of estate agents who do not belong to any professional body and who have a religious objection to belonging to any professional body in future.
I have looked carefully at the provisions of the Bill to see whether there is anything which prevents such people from practising as estate agents in the future, and I am convinced that there is not. As I read it, there is nothing in the Bill which forces an unattached estate agent into one of the existing bodies. Provided that he is able to keep a client account and he is able in due course, when regulations are made, to obtain bonding or insurance, he is all right. Nobody is forced into an organisation, and there is no restriction on the number of professional organisations which can exist.
948 Again, I think that the provision in the Bill in that respect is absolutely right, because it continues the principles of both freedom of conscience and of free entry into the profession.
There has been a good deal of discussion about Clause 20, which permits the Secretary of State to recognise approved experience or professional or academic qualifications as evidence of competence to practise estate agency. My hon. Friend explained his approach to these problems, with which I wholly agree.
By way of background, I should point out that there is at present no nationally recognised qualification in estate agency work. Members of two of the three main national associations have to prove competence in such subjects as surveying or valuing, but though relevant in those areas these are not necessarily relevant to a practice limited only to estate agency, and I think it right to protect the position of estate agents who may be unqualified in those subjects but who nevertheless give the public a competent, satisfactory and competitive service.
I recognise and acknowledge the raising of standards in estate agency which has been achieved by the two main professional associations. We are grateful for their efforts in that respect. But, at the same time, I should make clear that my Department and the Government are opposed to establishing any kind of professional monopoly in estate agency, and I hope that my hon. Friend will resist any moves which would take him in that direction.
We are in favour of a system which allows relatively free entry. I have an open mind about how much experience anybody ought to have before running a business and about any basic examination qualifications. The hon. Member for Romford (Mr. Neubert) knows a good deal about the travel trade. I believe that one of the requirements for being a member of ABTA is that one must have had two years or some such experience in the travel agency business before practising as a principal. It might be worth while to look at that sort of experience qualification.
I shall say something about the way in which the Government see the use of the regulatory powers conferred on them, but I think that, on the whole, the trend is 949 very much away from restriction of entry and in favour of allowing free competition, outlawing scale charges and so on. When I was a Minister at the Department of Employment I was very much opposed to the sort of academic hurdle race which is set up for people not just in the professions but even in the trades and vocations. There seems to be a tendency to create academic hurdles which have to be jumped over before one can even start to learn one's job. For my part, I am very much opposed to that, and certainly opposed to such a trend if it takes place in the professions.
I see Clause 20 as being used to require the competence which is needed for the protection of the general public, not for the protection of the professions. If one follows that principle in Clause 20, making regulations only to protect the consumer and the general public and not making regulations the object of which is to protect the profession, or sections of the profession, I think that one will have the balance right.
If pressed to give examples of the sort of qualifications which ought to be required for the protection of the public, I can mention a basic requirement to be able to keep books, a requirement that one understands the rules about client accounts or one understands the content of the Bill. I think that that might well he necessary for the protection of the public.
§ Mr. Fraser
Yes, to read and write, and mathematical competence, but I am a bit doubtful about how one should proceed. That immediately brings up the question whether we test competence to read and write by requiring a person to have passed the CSE above a certain level or to have a certain O-level qualification. I think that that must be looked at.
§ Mr. Weetch
Will my hon. Friend take it from me that part of the difficulty we are up against is that the established professions with their restrictive practices always argue that what is good for the profession is always good for the public? They maintain a network of restrictive practices on the argument that those practices are necessary to safeguard the public, and it is difficult for the public mind to distinguish what we are arguing about.
§ Mr. Fraser
I know of the tendency of many professions to say that what is for the protection of the profession is for the protection of the public. I have it in my own profession.
§ Mr. Fraser
I hear my hon. Friend say "Particularly solicitors". I seem to remember that when I first tried to become trained as a solicitor I was told that there was a fairly hefty premium and stamp duty which had to be paid as a precondition for going into training. When I asked for the reason, I was told that it was to keep the wrong type out of the profession. Presumably, I was the wrong type at the time.
That practice changed. Premiums and stamp duty were eliminated, and then people could go into training for the profession if they had a number of O-levels in certain subjects. A lot of people went into the profession with O-levels, and then the professional body said "Now we shall raise standards of competence. You must have A-levels in certain subjects." A lot of people then got their A-levels and went into the profession. Then, I think, the Law Society said that the next thing to do was to require a degree before someone could go into the profession. That is really side-tracking a little.
I accept that there is always a danger that the fixing of unnecessary qualifications is not for the protection of the public and may work to the detriment of certain sections of the population, particularly working-class children who may not have had an opportunity in their early days to obtain the qualifications imposed as a precondition of entry.
It is right for many professions that their members, having obtained entry into the profession, should have the opportunity to train within it. I am very much against the hurdle to entry in the first place. I hope that I shall have satisfied the House about the way in which, if the regulation power was placed in my hands, I would choose to operate it.
Many provisions of the Bill require the Secretary of State to engage in prior consultation with representatives of estate agents, of consumers and of other interested bodies. As that is a precondition of many of the regulation-making powers, I 951 will tell the House what I have in mind if the Bill becomes law.
Given that structure in the Bill, I should certainly consider the establishment of a non-statutory estate agency advisory council which would include representatives of all large estate agency bodies and a representative of unattached agents as well. That looks after the position of the minority. Represented on that advisory body also would be consumers, and one would have to consider the other representatives that it might have on it.
The purpose of the advisory council would be to consult with the Secretary of State and advise him about the discharge of his functions under the Act. This should help the considerable range of regulations that it is possible to make under the Bill, when enacted, to be framed in terms which are both effective and acceptable to all the interests involved. Often what would be incorporated into regulations under the Bill would be the best customs and practices engaged in by the vast majority.
My hon. Friend the Member for Enfield, North is wise not to try to tackle all the complexities of this problem specifically in his Bill. It is immensely difficult to try to lay down in an Act of Parliament every requirement as to the way in which client accounts should be kept, every single requirement about how indemnity schemes should be run and requirements about exactly what qualifications an estate agent ought to have.
In other legislation that I have to operate, it is not always easy to operate in the interests of commerce or of consumers because the House has so tried to dot the i's and cross the t's in its primary legislation that the element of flexibility is considerably reduced when one tries to put primary legislation into practice.
I have made it quite clear that the Government support the Bill. We believe that it is a necessary and urgent measure—not because there is widespread abuse at the moment; but one cannot tell, on the experience of the last 80 years, that there might not be problems, not in the next 80 years but in the next decade, if the nature of the property market changed. This Bill is wanted by the estate agency bodies. No objection has 952 been raised to it by the unattached agents. I think that their objections and fears when the proposals were first put forward have been adequately met. It is certainly wanted by consumers.
I know from the discussions that I had after my hon. Friend told me that he was proposing to introduce legislation on this subject that the Bill is also welcomed by the local authorities. We could always have another rash of abuse and dishonesty. Therefore, the time is not only ripe for legislation but over-ripe.
I am grateful for the support that the House has given to the Bill. In supporting my hon. Friend, I would commend the Bill to the House and hope that it has an unopposed Second Reading and a successful and speedy passage through Committee.
§ 2.34 p.m.
§ Mr. Bryan Davies
By leave of the House, may I be permitted to intervene for a second time to reflect on one or two of the more substantial points?
§ Mr. Cranley Onslow (Woking)
On a point of order, Mr. Deputy Speaker. The hon. Member for Enfield, North (Mr. Davies) sought the leave of the House and indicated that he wanted to take a lot of the time of the House. I am sure that the leave of the House cannot be conditional, but if the hon. Gentleman is going to intervene—as he has indicated—at some length, does he automatically have our leave?
§ Mr. Deputy Speaker (Mr. Bryant Godman Irvine)
If objection is taken, the hon. Gentleman does not have leave to speak again.
§ Mr. Bryan Davies
I seek to reassure the House that I have no intention of prolonging the debate beyond an unnecessary point—
§ Mr. Russell Kerr
On a point of order, Mr. Deputy Speaker. This is an outrage. I am sure that the hon. Member for Working (Mr. Onslow) did not do it maliciously, but the objection he raised was an outrage. Can we do anything to let my hon. Friend the Member for 953 Enfield, North (Mr. Davies) make the points he said he wished to make, which, I am sure, were meant only to be helpful?
§ Mr. Deputy Speaker
There is a longstanding rule of the House that once objection has been taken there is no right of reply, and, therefore, the hon. Member for Enfield, North (Mr. Davies) may not make a second speech.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).